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Loan Repayment Performance in Community Development Finance Institutions in the UK

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Abstract.

This paper identifies the key institutional factors that influence loan loss rates in Community Development Finance Institutions in the UK. Traditional bank credit assessment puts the blame of poor loan performance largely on the borrower. This is the first study of its kind to examine institutional characteristics of 16 CDFIs in the UK and assess their influence on the loan loss rates. The results show that 8 out of the 13 institutional characteristics examined significantly influence loan repayment performance. Although a vast body of literature supports the view that borrower characteristics are highly influential, our results provide strong evidence to show that institutional characteristics are equally important and both factors need to be taken into account if loan repayment performance is to be improved.

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Authors and Affiliations

  1. Centre for Growing Business, Nottingham Business School, Nottingham Trent University, Burton St., Nottingham, NG1 4BU, UK

    William K. Derban

  2. Aston Business School, Aston University, Aston Triangle, Birmingham, B4 7ET, UK

    Jane M. Binner

  3. Birmingham Business School, University of Birmingham, Edgbaston, Birmingham, B15 2TT, UK

    Andy Mullineux

Authors
  1. William K. Derban
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  2. Jane M. Binner
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  3. Andy Mullineux
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Correspondence to Jane M. Binner.

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Derban, W.K., Binner, J.M. & Mullineux, A. Loan Repayment Performance in Community Development Finance Institutions in the UK. Small Bus Econ 25, 319–332 (2005). https://doi.org/10.1007/s11187-004-6483-y

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  • DOI: https://doi.org/10.1007/s11187-004-6483-y

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