Because larger loans create greater incentives for borrowers to engage in undesirable activities that make it less likely they will repay the loans,banks

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By granting smaller loans, banks can limit the incentives for potentially risky behavior and reduce the risk of default. This is a common strategy used by banks to manage their risk and protect their assets. Charging higher interest rates or fees may not necessarily deter risky behavior and may even worsen the borrower's ability to repay the loan.

Because Larger Loans Create Greater Incentives for Borrowers to Engage