The evolution of credit terms : an empirical study of commercial bank lending to developing countries

Abstract

This paper studies changes in spreads on bank loans to developing countries during 1968-81. It found that a borrower's experience had a significant impact on spreads. Spreads started at high values at low levels of loan experience and decreased as experience increased. Spreads at initial-experience levels were about 30 percent above benchmark, with experience. The impact of experience became negligible with 30 prior loans. The paper also suggests that a greater role for international organizations in collecting and disseminating information about potential borrowers. Indeed, international institutions have been doing more of this fact-finding since the onset of the debt crisis.Financial Intermediation,Economic Theory&Research,Banks&Banking Reform,Economic Adjustment and Lending,Environmental Economics&Policies