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 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.

Bibliographic Details

Main Authors:	Geginat, Carolin, Kraay, Aart
Language:	English
Published:	World Bank, Washington, DC 2007-08
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 https://hdl.handle.net/10986/7279
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