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23 May, 02:49

What specific procedures do financial intermediaries use to reduce asymmetric information problems in lending?

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  1. 23 May, 05:41
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    To reduce asymmetric information problems, lenders first carefully screen a potential borrower to ascertain their capability of fulfilling the conditions of the loan. The lender may also add legal clauses to the contract to limit the manner in which the borrowed funds can be used or actually restrict the borrower's behavior. Collateral to secure the loan may also be required by the lender.
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