I'll Take the Stir Fry, Please

What is more effective in getting individuals to repay loans?  Pieces of paper which pledge assets in case of default, or, ostracism?  In China, well at least in Wenzhou, its ostracism.

"Borrowers default on nearly half the loans issued by the state-owned banks, but seldom do so here on money that is usually borrowed from relatives, neighbors or people in the same industry. Residents insist that the risk of ostracism for failing to repay a loan is penalty enough to ensure repayment of most loans."

From an article in The New York Times titled “Informal Lenders in China Pose Risks to Banking System."

This informal lending, without the blessing of the state, is called "Wenzhou “stir-fry".” Make mine to go.

Posted by on 11/09 at 07:50 AM

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