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SSRN Electronic Journal
Article . 2020 . Peer-reviewed
Data sources: Crossref
EconStor
Research . 2020
Data sources: EconStor
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Lending to the Unbanked: Relational Contracting with Loan Sharks

Authors: Lang, Kevin; Leong, Kaiwen; Li, Huailu; Xu, Haibo;

Lending to the Unbanked: Relational Contracting with Loan Sharks

Abstract

We study roughly 11,000 loans from unlicensed moneylenders to over 1,000 borrowers in Singapore and provide basic information about this understudied market. Borrowers frequently expect to repay late. While lenders do rely on additional punishments to enforce loans, the primary cost of not repaying on time is compounding of a very high interest rate. We develop a very simple model of the relational contract between loan sharks and borrowers and use it to predict the effect of a crackdown on illegal moneylending. Consistent with our model, the crackdown raised the interest rate and lowered the size of loans.

Related Organizations
Keywords

illegal lending, L14, ddc:330, K42, enforcement, relational contract

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
Average
Average
bronze