Learning‐by‐lending and learning‐by‐repaying:A two‐sided learning model for defaults on Small Business Administration loans

Patel, Pankaj C. and Tsionas, Mike G. (2021) Learning‐by‐lending and learning‐by‐repaying:A two‐sided learning model for defaults on Small Business Administration loans. Managerial and Decision Economics. ISSN 0143-6570

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Abstract

Drawing on a sample of Small Business Administration (SBA) loans, we develop and test for a two-sided dynamic learning model to assess the degree of learning-by-lending in bank branches and learning-by-repaying for borrowers. The results show that learning-by-lending is negligible; however, learning-by-repaying is small but meaningful, with a shallow learning curve slope of 0.2. The findings have implications for two-sided learning and for policymakers aiming to lower defaults in SBA loans.