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Do collateral theories work in social banking ?

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Abstract

We study the determinants of collateralisation on the universe of credit files of non individual borrowers in a “Grameen’s type” Bank (Banca Popolare Etica) which aims to reconcile economic sustainability with the pursuit of social goals. The extremely high share of uncollateralized loans (around 42 percent) appears consistent with a multistakeholder (customer oriented) approach which internalises the welfare costs of default of collateralised borrowers. Econometric findings document that collateralisation depends positively on ex ante borrower’s risk (proxyed by non performing past track record) and, negatively, on relationship lending. The incentive effect seems to work since collateralised borrowers are ex ante, but not ex post, riskier.

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  • Leonardo Becchetti & Melody Garcia, 2008. "Do collateral theories work in social banking ?," CEIS Research Paper 131, Tor Vergata University, CEIS, revised 07 Nov 2008.
    • Handle: RePEc:rtv:ceisrp:131
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Simon Cornée & Ariane Szafarz, 2014. "Vive la Différence: Social Banks and Reciprocity in the Credit Market," Journal of Business Ethics, Springer, vol. 125(3), pages 361-380, December.
    2. Marlene Karl, 2015. "Are Ethical and Social Banks Less Risky? Evidence from a New Dataset," Discussion Papers of DIW Berlin 1484, DIW Berlin, German Institute for Economic Research.
    3. Artis, Amélie, 2017. "Social and solidarity finance: A conceptual approach," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 737-749.
    4. Gustavo Barboza & Sandra Trejos, 2009. "Micro Credit in Chiapas, México: Poverty Reduction Through Group Lending," Journal of Business Ethics, Springer, vol. 88(2), pages 283-299, September.
    5. Amélie Artis & Simon Cornée, 2013. "Transformation informationnelle, certification et intermédiation financière : le cas de la banque solidaire," Economics Working Paper Archive (University of Rennes & University of Caen) 201326, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    6. Marlene Karl, 2015. "Are Ethical and Social Banks Less Risky? Evidence from a New Dataset. WWWforEurope Working Paper No. 96," WIFO Studies, WIFO, number 58138, March.
    7. Amélie Artis & Simon Cornée, 2017. "Composition, Interpretation and Memorisation of the Idiosyncratic Knowledge in Social Banking," Working Papers CEB 17-002, ULB -- Universite Libre de Bruxelles.
    8. Labrini Sideri, 2021. "Leveraging CSR for Sustainability: Assessing Performance Implications of Sustainability Reporting in a National Business System," Sustainability, MDPI, vol. 13(11), pages 1-16, May.
    9. Simon Cornée, 2012. "The Relevance of Soft Information for Predicting Small Business Credit Default: Evidence from a Social Bank," Economics Working Paper Archive (University of Rennes & University of Caen) 201226, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS, revised Sep 2015.

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    More about this item

    Keywords

    collateral; bank-firm relationship; credit risk.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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