Exploiting the Unbanked: Evidence from Singapore's Unlicensed Moneylending Market

100 Pages Posted: 17 Sep 2018

See all articles by Kaiwen Leong

Kaiwen Leong

Nanyang Technological University (NTU)

Huailu Li

Fudan University, School of Economics

Haibo Xu

Fudan University

Abstract

Using a unique dataset covering the borrowing behaviour of over a thousand borrowers, we study the unlicensed moneylending market in Singapore. In this market, borrowers search for lenders, and lenders decide how much profit to extract from borrowers. Lenders harass borrowers into compliance. We observe that different lenders apply different markups on different borrowers. Higher markups discourage borrowers from repeatedly borrowing from a particular lender. Increased enforcement specifically targeted at reducing the number of lenders in this market will increase markups, but will not deter borrowers from becoming recurrent borrowers because they have fewer lenders to choose from.

Keywords: illegal lending, enforcement, markup

JEL Classification: K42

Suggested Citation

Leong, Kaiwen and Li, Huailu and Xu, Haibo, Exploiting the Unbanked: Evidence from Singapore's Unlicensed Moneylending Market. IZA Discussion Paper No. 11786, Available at SSRN: https://ssrn.com/abstract=3249900 or http://dx.doi.org/10.2139/ssrn.3249900

Kaiwen Leong (Contact Author)

Nanyang Technological University (NTU) ( email )

S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore

Huailu Li

Fudan University, School of Economics ( email )

Han Dan Lu 220 Hao, 11 Hao Lou, 128 Shi
Shanghai, Shanghai 200433
China

Haibo Xu

Fudan University ( email )

Beijing West District Baiyun Load 10th
Shanghai, 100045
China

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