Finance and inequality: the distributional impacts of bank credit rationing
We analyze reductions in bank credit using a natural experiment where unprecedented flooding in Pakistan differentially affected banks that were more exposed to the floods. Using a unique data set that covers the universe of consumer loans in Pakistan and this exogenous shock to bank funding, we fin...
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rr-article-225478662022-09-30T00:00:00Z Finance and inequality: the distributional impacts of bank credit rationing M Ali Choudhary (14331552) Anil Jain (47053) Banking, finance and investment Credit markets Capital Liquidity Financial stability Inequality Adverse selection Relationships <p>We analyze reductions in bank credit using a natural experiment where unprecedented flooding in Pakistan differentially affected banks that were more exposed to the floods. Using a unique data set that covers the universe of consumer loans in Pakistan and this exogenous shock to bank funding, we find two key results. First, following an increase in their funding costs, banks disproportionately reduce credit to borrowers with little education, little credit history, and seasonal occupations. Second, the credit reduction is not compensated by relatively more lending by less-affected banks. The empirical evidence suggests that a reduction in bank monitoring incentives caused the large relative decreases in lending to these borrowers.</p> 2022-09-30T00:00:00Z Text Journal contribution 2134/22547866.v1 https://figshare.com/articles/journal_contribution/Finance_and_inequality_the_distributional_impacts_of_bank_credit_rationing/22547866 CC BY-NC-ND 4.0 |
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Banking, finance and investment Credit markets Capital Liquidity Financial stability Inequality Adverse selection Relationships |
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Banking, finance and investment Credit markets Capital Liquidity Financial stability Inequality Adverse selection Relationships M Ali Choudhary Anil Jain Finance and inequality: the distributional impacts of bank credit rationing |
| description |
We analyze reductions in bank credit using a natural experiment where unprecedented flooding in Pakistan differentially affected banks that were more exposed to the floods. Using a unique data set that covers the universe of consumer loans in Pakistan and this exogenous shock to bank funding, we find two key results. First, following an increase in their funding costs, banks disproportionately reduce credit to borrowers with little education, little credit history, and seasonal occupations. Second, the credit reduction is not compensated by relatively more lending by less-affected banks. The empirical evidence suggests that a reduction in bank monitoring incentives caused the large relative decreases in lending to these borrowers. |
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Default Article |
| author |
M Ali Choudhary Anil Jain |
| author_facet |
M Ali Choudhary Anil Jain |
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M Ali Choudhary (14331552) |
| title |
Finance and inequality: the distributional impacts of bank credit rationing |
| title_short |
Finance and inequality: the distributional impacts of bank credit rationing |
| title_full |
Finance and inequality: the distributional impacts of bank credit rationing |
| title_fullStr |
Finance and inequality: the distributional impacts of bank credit rationing |
| title_full_unstemmed |
Finance and inequality: the distributional impacts of bank credit rationing |
| title_sort |
finance and inequality: the distributional impacts of bank credit rationing |
| publishDate |
2022 |
| url |
https://hdl.handle.net/2134/22547866.v1 |
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1799721898378002432 |