Credit Market Structure and Collateral in Rural Thailand

46 Pages Posted: 5 Oct 2017

See all articles by Carmen Kislat

Carmen Kislat

Leibniz Universität Hannover - Faculty of Economics and Management

Lukas Menkhoff

German Institute for Economic Research (DIW Berlin); Humboldt University of Berlin - Faculty of Economics

Doris Neuberger

University of Rostock - Department of Economics

Date Written: November 2017

Abstract

This paper empirically examines reliance on collateral in different credit market segments—formal, semiformal and informal lending—of a developing rural financial market. Determinants of collateralization indicate that all three types of lenders price risk conventionally. Controlled for standard risk factors, however, formal lenders rely on collateral about 40 per cent more often than informal lenders. The difference is explained by informal lenders’ better information on borrowers. This is shown by informal lenders’ behaviour: a longer lending relationship does not improve information about the borrower but shorter distance to the borrower does—the opposite applies to formal lenders, as predicted by theory.

Suggested Citation

Kislat, Carmen and Menkhoff, Lukas and Neuberger, Doris, Credit Market Structure and Collateral in Rural Thailand (November 2017). Economic Notes, Vol. 46, Issue 3, pp. 587-632, 2017. Available at SSRN: https://ssrn.com/abstract=3048066 or http://dx.doi.org/10.1111/ecno.12089

Carmen Kislat (Contact Author)

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

Lukas Menkhoff

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Humboldt University of Berlin - Faculty of Economics ( email )

Spandauer Strasse 1
Berlin
Germany

Doris Neuberger

University of Rostock - Department of Economics ( email )

Ulmenstr. 69
Rostock, 18057
Germany
+49 381 498 4346 (Phone)
+49 381 498 4341 (Fax)

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