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How do Stronger Insolvency Laws Impact Borrower Decisions? PowerPoint PPT Presentation


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ROMANIA:. How do Stronger Insolvency Laws Impact Borrower Decisions?. Policy questions. Study the impact of new out-of-court debt restructuring guidelines introduced in Romania in November 2010

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How do Stronger Insolvency Laws Impact Borrower Decisions?

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Romania

ROMANIA:

How do Stronger Insolvency Laws Impact Borrower Decisions?


Policy questions

Policy questions

  • Study the impact of new out-of-court debt restructuring guidelines introduced in Romania in November 2010

    • The debtor and the creditor now have the option to enter into a mutually agreed upon debt restructuring, in a way that allows the debtor to continue doing business

    • Out-of–court restructuring is perceived as more effective than the court process because in successful cases, the dispute is settled earlier and the debt is recovered more often.

    • Currently, most delinquent borrowers enter insolvency


Policy questions1

Policy questions

  • As a simpler and cheaper alternative to the courts, the main expected beneficiaries are SME’s.

  • Our aim is to identify:

  • The causal effects of learning about the new law on SME borrower:

    • loan repayment rates

    • the size and frequency of new loan requests

  • The impact of in-person training relative to other delivery mechanisms, such as mail, video, and internet.


Intervention

Intervention

  • We test the interactive impact of:

    • Learning about the new law

    • The delivery mechanism of educating borrowers

Classroom lecture

E-learning

Video

Mailing

(lowest) Intervention Cost (highest)


Future influence on policy

Future influence on policy

  • For WB/IFC staff & government partners:

    • Understanding the potential impact of insolvency reforms on financial stability, employment, and firm survival

  • For lenders:

    • Identifying a cost-effective way to inform borrowers of insolvency reforms

    • Reducing losses and improving profitability


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