USURIOUS LOAN & ISLAMIC LOAN

From Loan Screening to Loan Prospecting

We study a controlled corporate experiment in which loan officers were compensated to engage in loan prospecting in addition to the traditional loan screening. Loan prospecting led to larger loan sizes (+15%) and higher origination rates (+31%) while keeping the traditional credit quality threshold and interest rate intact. Loan officers attempt to influence the decision making process: loan of...

Loan Rate Setting

We propose a heteroscedastic regression model to identify the determinants of the dispersion in interest rates on loans granted to small and medium sized enterprises. We interpret unexplained deviations as evidence of the banks’ discretionary use of market power in the loan rate setting process. “Discretion” in the loan-pricing process is most important, we find, if: (i) loans are small and unc...

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The Student Loan Trap

I would like for you to join me in a thought exercise to explore how and why our current generation of students are compelled to shoulder up to $100,000 in graduate school debt to enter our profession. Not only are the debt levels onerous, these loans typically bear interest rates of up to 7%. In contrast, it is easy to get a car loan for around 4%. What is the meaning of this for our newly min...

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