Banks in developing economies are less willing to lend to small firms because:
A)of higher loan default rates.
B)interest rates charged cover transaction costs.
C)of lower adverse selection.
D)of lower moral hazard.

Question

Quizplus · Accepted Answer

Banks in developing economies are less willing to lend to small firms because of higher loan default rates. Small firms often lack collateral and have unstable incomes, which makes it riskier for banks to lend to them. This increases the likelihood of loan defaults, which is a common problem for banks in developing economies. As a result, banks may charge higher interest rates or simply avoid lending to small firms altogether.

Banks in Developing Economies Are Less Willing to Lend to Small