We study a controlled corporate experiment in which loan officers was altered from fixed salary to volume-based pay. The incentives increased aggressiveness of origination: higher origination rates (+31%), loan sizes (+15%), and default rate (+28%). The effects are partly driven by moral hazard: approval decision is driven by loan officers’ discretion; however, default is uncorrelated with disc...

Loan contracts performance determines the profitability and stability of the financial institutions, and screening the loan applications is a key process in minimizing credit risk. Before making any credit decisions, credit analysis (the assessment of the financial history and financial backgrounds of the borrowers) should be completed as part of the screening process. Good borrowers with low c...

Bivariate probit analysis was used to assess the efficacy of a South African microlender’s loan screening process. This micro-lender grants short-term cash loans to individuals who are employed and earning a fixed salary. Loan applicants with more stable incomes, who are contactable via telephone or post, who are employed in less risky business sectors, who have more disposable income relative ...

This article analyzes the use of racial differences in loan default to test for mortgage lending discrimination—an approach whose underlying theory has not been carefully explored. The loan approval process creates a selected sample of loans. If mortgage lenders hold minorities to a higher standard, the minority sample should have greater selection bias than the majority sample and so should ex...

Loan portfolio problems have historically been the major cause of bank losses because of inherent risk of possible loan losses (credit risk). The study of Bank Loan Fraud Detection and IT-Based Combat Strategies in Nigeria which focused on analyzing the loan assessment system was carried out purposely to overcome the challenges of high incidence of NonPerforming Loan (NPL) that are currently be...

Consumers have to trust that financial services will work for, rather than against them. In a recent speech, Mark Hoban (2010) MP, Financial Secretary to the UK Treasury, stated that “We need a financial sector that works for consumers—one that earns their confidence, competes for their services, and keeps them properly informed.” The collection, use, maintenance, and disclosure of consumer inf...

The paper studies the bank’s lending decision, based on three observed phenomena: Banks earn substantial profits from off-balance sheet activities and services, which they take into account in their lending decisions. Secondly, the critical point in the customer relation is the loan decision: the probability of the customer staying with the bank is a function of the loan extended each time one ...

Providing the best service in order to satisfy users is the main objective of any library. The loan policy is a major tool available to achieve this objective. Previous studies have all focused on the loan period, ignoring the loan policy’s other equally important aspect, which is the maximum number of books a user can borrow. Moreover, only book availability has been used as a measure of user ...

This paper studies loan collateral and relationship banking. A firm has different loans (e.g. short-term and long-term loans) and alternative collateral assets. How does it allocate the collateral assets between the loans? It optimally secures a long-term loan with collateral that incurs high information costs initially and has a strong learning effect during the loan period (e.g. accounts rece...