Impact of Institutions on Lending

Transcription

1 Chuluunbaatar Enkhzaya Impact of Institutions on Lending Informal Constraints and Enforcement of Bank Regulation in Mongolia With a foreword by Prof. Dr. Alexander Karmann Deutscher Universitats-Verlag

2 Introduction 1 Motivation 1 Research Questions 3 Structure 4 Part 1 The Impact of Institutions on Lending The New Institutional Economics Institutions Matter Institutions in Economic Science: the New Institutional Economics 11 The Old Institutionalism 12 The New Institutional Economics and their relevance to Neo-classic 12 Main approaches of New Institutional Economics The Theory of Economic and Institutional Change 16 Institutional framework and economic performance 16 Nature of institutional change 18 Human learning as long-run source of change 21 Understanding of transitional problems and weakness of NIE Institutional Framework of Lending Applying NIE to Lending 24 Transaction costs, institutions, and organisations in lending 24 Institutional framework of lending in a market economy Institutional Framework of lending in transition 27 Transaction costs and institutions of lending in transition27 Banks and their behaviour during transition 30 Consistency of formal institutions with informal institutions in lending 32

3 1.3 Cognitive Approach to Analysing Institutions of Lending Cognitive Approach to Institutional Analysis: Institutions, Mental Models and Knowledge 34 Decision making within cognitive psychology 36 Institutions, cognitive/mental models, and knowledge Models of Knowledge Organisation and Elicitation of Action-Regulating Knowledge 40 Knowledge organisation 40 Action-regulating knowledge Banker's Action-Regulating Knowledge in Lending 47 Part 2 The Economic and Banking Situation of Mongolia The State of Economic Transition in Mongolia The Historical and Political Background of Mongolian Economy 49 Three socio-political systems within one Century 49 Present socio-economic system The Stylised Facts of Transformation 53 Macroeconomic accomplishments: Output, inflation 53 Macroeconomic policies and the lack of microeconomic adjustments Institutions in Transition Performance of Lending Organisations in Mongolia Financial Intermediation and the Role of Lending 59 Types of financial organisations 59 Financial intermediation and lending Bank Behaviour: Loan Allocation and Lending Uncertainties 65 Bank behaviour and loan allocation 65 Uncertainties and transaction costs in lending 67 Missing incentives or lenders passivity Institutions of Lending in Mongolia: Some Hypotheses Incentives Shaped by Existing or Missing Institutions of Lending 70

4 2.3.2 Formal Institutions of Lending: Bank Regulation Norms on Lending Activity 73 Institutionalisation of bank regulation 73 Setting up regulation norms The Inconsistency of Informal Constraints with Formal Norms 77 Part 3 Discrepancy between Bank Regulation Norms and Lending Practice in Mongolia Diagnosing Action-Regulating Knowledge (Method) Research Design and Methods 81 The qualitative-quantitative approach 82 Methodological triangulation Concept Mapping as a Tool Based on Cognitive Science Diagnosing the Action-Regulating Knowledge of Bankers with Concept Mapping Bankers' Mental Model on Lending (Survey) Sampling Instrumentation: Key Concepts and Questions 98 Concept mapping 98 Individual interviews 103 Observing documents and records Procedure Lending Practice and Bank Regulation (Results) Data Analysis 110 Analysing the data from concept mapping (main analysis) 110 Analysing the data from documents and records 130 Analysing the data from individual interviews Findings 136 Attitude to risk 136 Bankers' perception about bank supervision 141 Social commitment: Commitment to the authoritative state 142 Standards of ethic: Family ties and personal relations 142

5 Part 4 Institutions Building and Adjustment of Bank Regulation Norms in Mongolia Discussion of Findings on Informal Constraints with Respect to Formal Institutions Informal Constraints of Lending in Mongolia Incompatibility of Informal Institutions with Formal Institutions Implications and Future Challenges Restructuring the Overall Institutions over Time Approaches to Institutional Building in Lending in Mongolia 151 Altering the insubstantial attitude to risk 151 Impersonalising the exchange relationship 153 Altering mental models of individuals regarding the role of the state 156 Altering bankers' perception about the functioning of bank supervision 157 Part 5 Conclusions 159 Annex References