Do Collateral Theories Work in Social Banking?

36 Pages Posted: 9 Nov 2008

See all articles by Leonardo Becchetti

Leonardo Becchetti

University of Rome Tor Vergata - Faculty of Economics

Maria Melody Garcia

University of Rome II - Faculty of Economics

Date Written: October 2008

Abstract

We study the determinants of collateralisation on the universe of credit files of non individual borrowers in a "Grameen's type" Bank (Banca Popolare Etica) which aims to reconcile eeconomic sustainability with the pursuit of social goals.

The extremely high share of uncollateralized loans (around 42 percent) appears consistent with a multistakeholder (customer oriented) approach which internalises the welfare costs of default of collateralised borrowers. Econometric findings document that collateralisation depends positively on ex ante borrower's risk (proxyed by non performing past track record) and, negatively, on relationship lending. The incentive effect seems to work since collateralised borrowers are ex ante, but not ex post, riskier.

Keywords: collateral, bank-firm relationship, credit risk

JEL Classification: G21

Suggested Citation

Becchetti, Leonardo and Garcia, Maria Melody, Do Collateral Theories Work in Social Banking? (October 2008). CEIS Working Paper, Vol. 6, Issue 9, No. 131, Available at SSRN: https://ssrn.com/abstract=1297207 or http://dx.doi.org/10.2139/ssrn.1297207

Leonardo Becchetti (Contact Author)

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia, 2
I-00133 Rome
Italy

Maria Melody Garcia

University of Rome II - Faculty of Economics ( email )

Via Columbia 2
Rome, 00133
Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
197
Abstract Views
1,329
rank
193,638
PlumX Metrics