Narrow Results

The bank has the access to hard and soft information about small and medium-sized enterprises (SMEs) in order to manage the informational opacity. We carry out the study about the information and bargaining power between lenders and borrowers. Bargaining power is depicted based on more favorable loan rate. The proxy is regressed on hard information, soft information and other variables. We find out that more favorable hard information (Registered Capital and Proceeds of Sale) increases borrowers' bargaining power in China. We also obtain evidence suggesting that the length of borrowers' business affect the bargaining power.

Entrepreneurial and business skills are generally considered key to microbusiness success, hence to Microfinance Institution (MFI) clients’ loan repayment as well. However, empirical evidence is largely lacking, and where present, it is inconclusive on the importance of these skills for microfinance success. The present paper uses objective MFI loan repayment data to empirically test whether loan repayment rates positively correlate with self-evaluations on entrepreneurial and business skills of loan clients. A survey was conducted among 235 loan clients of uniCredit — an MFI in Ghana. We establish that MFI clients’ self-evaluation of their entrepreneurial and business skills are not related to their loan repayment rates. However, we observe that women repay their loans better than do male microbusiness entrepreneurs, and loan repayment was also better for those entrepreneurs with more than 15 years of business experience.