SMU SOE Seminar (Sep 27, 2019): Lending the Unbanked: Relational Contracting in Singapore's Unlicensed Moneylending Market

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ABSTRACT We study roughly 11,000 loans from unlicensed moneylenders to over 1,000 borrowers in Singapore and provide basic information about this understudied market. Borrowers frequently expect to repay late. While lenders do rely on additional punishments to enforce loans, the primary cost of not repaying on time is compounding of a very high interest rate. We develop a very simple model of the relational contract between loan sharks and borrowers and use it to predict the eﬀect of a crackdown on illegal moneylending. Consistent with our model, the crackdown raised the interest rate and lowered the size of loans. Keywords: Illegal lending, enforcement, relational contract. JEL Codes: K42, L14. Click here to view the paper. Click here to view the CV.
		PRESENTER Huailu Li Fudan University
		RESEARCH FIELDS Economics of crime Labour economics
		DATE: 27 September 2019 (Friday)
		TIME: 4pm - 5.30pm
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903