Lending policies of informal, formal and semiformal lenders - Evidence from Vietnam

Thi Thu Tra Pham, Robert Lensink*

*Corresponding author for this work

    Research output: Contribution to journalArticleAcademicpeer-review

    29 Citations (Scopus)

    Abstract

    This paper compares lending policies of formal, informal and semiformal lenders with respect to household lending in Vietnam. The analysis suggests that the probability of using formal or semiformal credit increases if borrowers provide collateral, a guarantor and/or borrow for business-related activities. The probability of using informal credit increases for female borrowers. It also appears that the probability of using formal credit increases in household welfare up to a certain threshold, but at a decreasing rate. In addition, the paper discerns the determinants of probability of default across lender types. Default risk of formal credit appears to be strongly affected by formal loan contract terms, e.g., loan interest rate and form of loan repayment, whereas default risk on informal loans is significantly related to the presence of propinquity and other internal characteristics of the borrowing household. Overall, the study raises several important implications for the screening, monitoring and enforcement instruments that may be employed by different types of lenders.

    Original languageEnglish
    Pages (from-to)181-209
    Number of pages29
    JournalEconomics of Transition
    Volume15
    Issue number2
    DOIs
    Publication statusPublished - 2007

    Keywords

    • financial sectors
    • credit
    • risk
    • households
    • Asia
    • Vietnam
    • CREDIT-SCORING MODELS
    • IMPERFECT INFORMATION
    • SAMPLE SELECTION
    • RISK
    • DETERMINANTS
    • BANKING

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