Does IDA Engage in Defensive Lending?

Does IDA Engage in Defensive Lending?

Multilateral development banks are frequently accused of "defensive lending," the practice of extending new loans purely in order to ensure that existing loans are repaid. This paper empirically examine this hypothesis using data on lend...

Full description

Bibliographic Details
Main Authors:	Geginat, Carolin, Kraay, Aart
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING ADMINISTRATIVE EXPENSES AMOUNT OF DEBT ARREARS BAILOUTS BALANCE SHEET BALANCE SHEETS BANK LENDING BANK POLICY BENCHMARK BIASES BORROWER BORROWING CAPITAL ADEQUACY CAPITAL ADEQUACY REQUIREMENTS CASH FLOWS COMMERCIAL LENDERS COMMERCIAL LENDING CREDITORS CREDITS CREDITWORTHINESS CREDITWORTHY BORROWER CREDITWORTHY BORROWERS DEBT DEBT BURDEN DEBT BURDENS DEBT ISSUES DEBT OUTSTANDING DEBT RELIEF DEBT SERVICE DEBT SERVICE OBLIGATIONS DEBT SERVICE PAYMENTS DEBT SERVICING DEBT STOCKS DEBT-SERVICE DEBTOR DEBTOR COUNTRY DEBTORS DEBTS DEPENDENT DEVELOPING COUNTRIES DEVELOPMENT BANKS DEVELOPMENT FINANCE DISBURSEMENT DISBURSEMENTS DUMMY VARIABLE DUMMY VARIABLES ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC SYSTEM ECONOMIC SYSTEMS EFFECT OF DEBT ELASTICITY EXCHANGE RATES EXTERNAL DEBT FINANCIAL COSTS FINANCIAL STATEMENTS FINANCIAL SYSTEM FUTURE DEBT GDP GDP PER CAPITA GNP GRACE PERIOD GRACE PERIODS HIGH DEBT INCOME INCOME STATEMENT INCREASE IN DEBT INDEBTED INDEBTED COUNTRIES INDEBTED POOR COUNTRIES INDEBTEDNESS INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INTERNATIONAL ECONOMICS LARGE BORROWERS LARGE DEBT LENDERS LENDING DECISIONS LEVELS OF DEBT LIQUIDITY LIQUIDITY CRISIS LOAN LOANS TO COUNTRIES MACROECONOMICS MATURITIES MONETARY FUND MORAL HAZARD MULTILATERAL DEVELOPMENT BANKS MULTILATERAL LENDER MULTILATERAL LENDERS NEGOTIATIONS NON-PERFORMING LOANS PAYMENT OF DEBT PER CAPITA INCOME PER CAPITA INCOMES PORTFOLIO PORTFOLIO PERFORMANCE POVERTY ALLEVIATION PRESENT VALUE PROCUREMENT PUBLIC POLICY RECIPIENT COUNTRIES REPAYMENT REPAYMENT CAPACITY REPAYMENT DIFFICULTIES REPAYMENT OF LOANS REPAYMENT PERIOD REPAYMENTS RULE OF LAW TOTAL DEBT TRUST FUND
Online Access:	http://documents.worldbank.org/curated/en/2007/08/8178721/ida-engage-defensive-lending http://hdl.handle.net/10986/7279

Description
Summary:	Multilateral development banks are frequently accused of "defensive lending," the practice of extending new loans purely in order to ensure that existing loans are repaid. This paper empirically examine this hypothesis using data on lending by and repayments to the International Development Association (IDA), which is the largest provider of concessional development loans to low-income countries. The authors argue that key institutional features of IDA both (i) potentially create incentives for defensive lending, and (ii) enable particularly sharp tests of the defensive lending hypothesis. The authors find that there is a surprisingly robust partial correlation between disbursements on new IDA loans and repayments on existing loans. However, a closer look at the evidence suggests that defensive lending is unlikely to be a major explanation for this partial correlation.

Cannot write session to /tmp/vufind_sessions/sess_amtfesh2csvarpi797rfkr5ddp