Too big to care?: Financial contracts and the problem of transactional asymmetry

T.T. Arvind

Too big to care? Financial contracts and the problem of transactional asymmetry

Research output: Contribution to journal › Article › peer-review

Abstract

Although financial inclusion as a policy objective has multiple dimensions, the focus of the debate on financial inclusion for SMEs has largely been on the issue of enhancing SME access to finance. This article argues that more attention needs to be paid to the issue of reshaping lender practices to make the delivery of finance to SMEs more responsible and sustainable. The terms of SME financing agreements offer considerable scope for lenders to engage in opportunistic or predatory behaviour and, as this article shows, there is evidence to suggest both that this is a problem, and that it causes material financial distress to SMEs and beyond. Against that background, this article argues that the law needs to take a less neutral approach that is more favourable to relational lending practices. It suggests a range of techniques, grounded in the established models of negotiated economies and corporate pluralism, which can help achieve this end. Although the challenge of fostering responsible and sustainable lending practices is not a simple one, it is one that can be met with the right combination of approaches.

Original language	English
Pages (from-to)	35-54
Journal	Law and Contemporary Problems
Volume	84
Issue number	1
Publication status	Published - 10 Mar 2021

Bibliographical note

This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. Further copying may not be permitted; contact the publisher for details.

Access to Document

Arvind - Too big to care
This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. Further copying may not be permitted; contact the publisher for details.
Accepted author manuscript, 242 KBLicence: Unspecified
Too Big to Care Financial Contracts and the Problem of Transactional AsymmetryFinal published version, 127 KB

https://lcp.law.duke.edu/article/too-big-to-care-arvind-vol84-iss1/

Cite this

@article{19e29e44a14e4a719fe475450015b864,

title = "Too big to care?: Financial contracts and the problem of transactional asymmetry",

abstract = "Although financial inclusion as a policy objective has multiple dimensions, the focus of the debate on financial inclusion for SMEs has largely been on the issue of enhancing SME access to finance. This article argues that more attention needs to be paid to the issue of reshaping lender practices to make the delivery of finance to SMEs more responsible and sustainable. The terms of SME financing agreements offer considerable scope for lenders to engage in opportunistic or predatory behaviour and, as this article shows, there is evidence to suggest both that this is a problem, and that it causes material financial distress to SMEs and beyond. Against that background, this article argues that the law needs to take a less neutral approach that is more favourable to relational lending practices. It suggests a range of techniques, grounded in the established models of negotiated economies and corporate pluralism, which can help achieve this end. Although the challenge of fostering responsible and sustainable lending practices is not a simple one, it is one that can be met with the right combination of approaches.",

author = "T.T. Arvind",

note = "This is an author-produced version of the published paper. Uploaded in accordance with the publisher{\textquoteright}s self-archiving policy. Further copying may not be permitted; contact the publisher for details.",

year = "2021",

month = mar,

day = "10",

language = "English",

volume = "84",

pages = "35--54",

journal = "Law and Contemporary Problems",

issn = "0023-9186",

publisher = "Duke University School of Law",

number = "1",

}

TY - JOUR

T1 - Too big to care?

T2 - Financial contracts and the problem of transactional asymmetry

AU - Arvind, T.T.

N1 - This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. Further copying may not be permitted; contact the publisher for details.

PY - 2021/3/10

Y1 - 2021/3/10

N2 - Although financial inclusion as a policy objective has multiple dimensions, the focus of the debate on financial inclusion for SMEs has largely been on the issue of enhancing SME access to finance. This article argues that more attention needs to be paid to the issue of reshaping lender practices to make the delivery of finance to SMEs more responsible and sustainable. The terms of SME financing agreements offer considerable scope for lenders to engage in opportunistic or predatory behaviour and, as this article shows, there is evidence to suggest both that this is a problem, and that it causes material financial distress to SMEs and beyond. Against that background, this article argues that the law needs to take a less neutral approach that is more favourable to relational lending practices. It suggests a range of techniques, grounded in the established models of negotiated economies and corporate pluralism, which can help achieve this end. Although the challenge of fostering responsible and sustainable lending practices is not a simple one, it is one that can be met with the right combination of approaches.

AB - Although financial inclusion as a policy objective has multiple dimensions, the focus of the debate on financial inclusion for SMEs has largely been on the issue of enhancing SME access to finance. This article argues that more attention needs to be paid to the issue of reshaping lender practices to make the delivery of finance to SMEs more responsible and sustainable. The terms of SME financing agreements offer considerable scope for lenders to engage in opportunistic or predatory behaviour and, as this article shows, there is evidence to suggest both that this is a problem, and that it causes material financial distress to SMEs and beyond. Against that background, this article argues that the law needs to take a less neutral approach that is more favourable to relational lending practices. It suggests a range of techniques, grounded in the established models of negotiated economies and corporate pluralism, which can help achieve this end. Although the challenge of fostering responsible and sustainable lending practices is not a simple one, it is one that can be met with the right combination of approaches.

M3 - Article

SN - 0023-9186

VL - 84

SP - 35

EP - 54

JO - Law and Contemporary Problems

JF - Law and Contemporary Problems

IS - 1

ER -