The Cross-Country Magnitude and Determinants of Collateral Borrowing
Using the World Bank Enterprise Survey covering 6,800 firms across 43 developing countries, this paper investigates the prevalence and determinants of collateralized borrowing. It focuses on the following two aspects: (1) whether firms' loans...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2012/03/15949444/cross-country-magnitude-determinants-collateral-borrowing http://hdl.handle.net/10986/19878 |
| Summary: | Using the World Bank Enterprise Survey
covering 6,800 firms across 43 developing countries, this
paper investigates the prevalence and determinants of
collateralized borrowing. It focuses on the following two
aspects: (1) whether firms' loans from financial
institutions require collateral (the extensive margin) and
(2) the collateral value relative to the loan value (the
intensive margin). On the first aspect, it finds that
collateral borrowing is prevalent. On average, 73 percent of
loans from financial institutions require collateral. Firms
that are small or sell domestically are significantly less
likely to pledge collateral. Shorter loans and loans from
non-bank financial institutions are also less often
associated with collateral. On the second aspect, it finds
that on average the loan value is at least 72 percent of the
collateral value. The only robust and significant
determinants of the collateral value are the type of assets
used for collateral. The analysis also checks whether
countries' income and institutions affect
collateralized borrowing. It finds that firms in countries
with higher income and better institutions and credit
information are significantly less likely to pledge
collateral. These factors, however, have little impact on
collateral values. |
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