New Working Paper by SOCENT professors Simon Cornée and Ariane Szafarz
“How Costly is Social Screening? Evidence from the Banking Industry”, by Simon Cornée, Panu Kalmi and Ariane Szafarz, has recently been published in the CERMi-CEB working papers series (WP 17-026) and is available for download on the SOCENT website.
Abstract: Social banks screen loan applicants by using both social and financial criteria, and social screening implies an extra workload. To check the costs involved in this type of screening, the authors used balance-sheet information on European banks, and compared the operating costs of social banks with those of other banks. Surprisingly, their first results suggest that social banks’ costs are not significantly higher than those of their mainstream counterparts. Next, they uncover that the extra costs of social screening are offset by a cheaper workforce. Despite their need for specific screening, social banks are financially sustainable in a market dominated by for-profit institutions.