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Kaiwen Leong
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Journal Articles
Publisher: Journals Gateway
The Review of Economics and Statistics 1–31.
Published: 27 September 2022
Abstract
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Using over 11,000 unlicensed loans to over 1,000 borrowers in Singapore, we provide basic information about an understudied market: illegal moneylending. Borrowers and lenders interact frequently and primarily rely on relational contracts to enforce their agreements. Borrowers have high discount rates, often have gambling and/or substance abuse problems, and often repay late. While lenders sometimes resort to nonfinancial punishments, the primary cost of late repayment is the compounding of a very high interest rate. Consistent with our view that lenders cannot extract all surplus, a crackdown on illegal lending raised interest rates and lowered the size of loans.
Includes: Supplementary data