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Effects of Collateral on Loan Repayment: Evidence from an Informal Lending Institution

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dc.creator Urassa, Goodluck C.
dc.creator Mori, Neema
dc.date 2016-09-14T13:33:50Z
dc.date 2016-09-14T13:33:50Z
dc.date 2016-05-03
dc.date.accessioned 2018-04-18T12:36:47Z
dc.date.available 2018-04-18T12:36:47Z
dc.identifier Charles, G. and Mori, N., 2016. Effects Of Collateral On Loan Repayment: Evidence From An Informal Lending Institution. Journal of African Business, 17(2), pp.254-272.
dc.identifier http://hdl.handle.net/20.500.11810/3700
dc.identifier 10.1080/15228916.2016.1151474
dc.identifier.uri http://hdl.handle.net/20.500.11810/3700
dc.description Full text can be accessed at http://www.tandfonline.com/doi/abs/10.1080/15228916.2016.1151474
dc.description We examine the effect of the collateral informal lenders use to ensure loan repayment. Specifically we measure how the use of movable and immovable assets affects loan repayment and delinquency rate, and assess the extent to which guarantorship and relationship-lending act as collateral to improve loan repayment. With a dataset of 835 individual borrowers drawn from an informal Tanzanian lending institution, we run descriptive and econometric models. The results suggest that movable assets increase the likelihood that borrowers perceived to be less creditworthy will obtain loans from informal sources and repay them. We also find a small proportion of customers to have pledged immovable assets as collateral when borrowing from informal lenders. The results also show the positive effect of referral, which implies that relationship lending and social collateral is key to increasing access to finance through informal lenders. Our results contribute to the advancement of economic theory, specifically in the ex-ante and ex-post-related literature.
dc.language en
dc.publisher Taylor & Francis
dc.subject Collateral
dc.subject Loan repayment
dc.subject Informal lending
dc.subject Delinquency
dc.subject Tanzania
dc.title Effects of Collateral on Loan Repayment: Evidence from an Informal Lending Institution
dc.type Journal Article, Peer Reviewed


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