IFS/STICERD/UCL Development Work in Progress Seminar
Shadow Banks on the Rise: Evidence Across Market Segments
Kim Fe Cramer (LSE), joint with Pulak Ghosh, Nirupama Kulkarni, & Nishant Vats
Thursday 10 October 2024 14:00 - 15:00
Many of our seminars and public events this year will continue as in person or as hybrid (online and in person) events. Please check our website listings and Twitter feed @STICERD_LSE for updates.
Unless otherwise specified, in-person seminars are open to the public.
Those unable to join the seminars in-person are welcome to participate via zoom if the event is hybrid.
About this event
This paper studies how drivers of shadow bank growth differ across loan market segments, using novel credit bureau data on the universe of formal retail loans in India. Proxying credit demand shocks with weather variation, we show that Fintechs respond more strongly than other non-Fintech shadow banks and traditional banks, on average and in uncollateralized markets such as consumer loans. Conversely, non-Fintech shadow banks are more responsive in collateralized markets such as agricultural loans. Both types show stronger responses for borrowers with low credit scores or no credit history. We argue that the dominant comparative advantage of Fintechs in uncollateralized markets is technology. First, Fintechs' reaction is stronger in regions with more data sharing, as a staggered rollout of a digital transaction platform demonstrates. Second, proprietary data of a Fintech lender shows that acceptance after demand shocks increases with higher alternative data scores. In contrast, the comparative advantage of non-Fintech shadow banks in secured markets is likely a combination of lax regulation and local presence to seize collateral. Thus, our findings suggest that the dominant factors driving shadow bank growth differ across market segments, thereby complementing the literature that has examined comparative advantages of shadow banks in the mortgage market.
This seminar series is jointly organized by the IFS, STICERD, and UCL.
IFS/STICERD/UCL Development Economics Work In Progress seminars are held on Thursdays in term time at 14:00-15:00, at the IFS, unless specified otherwise.
Seminar organisers: Oriana Bandiera (STICERD, LSE), Imran Rasul (UCL), Britta Augsburg (IFS) and Jonathan Weigel (LSE).
For further information please contact Britta Augsburg: britta_a@ifs.org.uk.
Registration is required, via our mailing list:
Please use this link to subscribe or unsubscribe to the Development Economics Work In Progress seminars mailing list (developmentwip).