UNSPECIFIED (2003) A theory of discouraged borrowers. SMALL BUSINESS ECONOMICS, 21 (1). pp. 37-49. ISSN 0921-898X

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Abstract

This paper examines the implications for the SME financing market of Application costs that vary between firms, and of imperfect screening of applicants by Banks. Under these conditions 'Discouraged Borrowers' can exist. These are good borrowers who do not apply for a bank loan because they feel they will be rejected. The paper shows that, under a range of assumptions, the scale of discouragement in an economy depends upon the screening error of the banks, the scale of Application costs and the extent to which the bank interest rate differs from that charged by the moneylender. Discouragement is shown to be at a maximum where there is some, but not perfect, information.

Item Type:	Journal Article
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Journal or Publication Title:	SMALL BUSINESS ECONOMICS
Publisher:	KLUWER ACADEMIC PUBL
ISSN:	0921-898X
Date:	August 2003
Volume:	21
Number:	1
Number of Pages:	13
Page Range:	pp. 37-49
Publication Status:	Published
URI:	http://wrap.warwick.ac.uk/id/eprint/9594

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