Borrowing in an Illegal Market: Contracting with Loan Sharks

• 成果类型: Article
• 署名作者: Lang, Kevin; Leong, Kaiwen; Li, Huailu; Xu, Haibo
• 署名单位: Boston University; Griffith University; Fudan University; National University of Singapore; University of Nottingham Ningbo China
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/rest_a_01246
• 发表日期: 2025-01
• 页码: 269-278
• 关键词: credit

摘要

Using over 11,000 unlicensed loans to over 1,000 borrowers inSingapore, we provide basic information about an understudied market:illegal moneylending. Borrowers and lenders interact frequently and relyprimarily on relational contracts to enforce their agreements. Borrowershave high discount rates, often have gambling and/or substance abuse prob-lems, and often repay late. While lenders sometimes resort to nonfinancialpunishments, the primary cost of late repayment is the compounding of avery high interest rate. Consistent with our view that lenders cannot extractall surplus, a crackdown on illegal lending raised interest rates and loweredthe size of loans.