Interpersonal lending of small amounts between individuals, such as family members and friends, has been around since the dawn of recorded human civilization. These transactions are likely to involve psychological factors that are absent in formal loans. Anecdotal evidence suggests, however, that unlike larger formal loans, small interpersonal loans are less likely to be repaid.
A new paper by DMEP member Coby Morvinski and Yaniv Shani in OBHDP finds that borrowers of small interpersonal loans think they should repay monies that lenders do not expect them to repay. This “repayment expectation gap” is explained by the finding that borrowers operate under exchange mindset and lenders operate under communal mindset. Consequently, lenders often shy from asking for their money back when repayment is not offered because doing so would suggest that the social relationship is less valued than the financial exchange. This behavior may explain why many small interpersonal loans remain unpaid. Paradoxically, lenders (vs. borrowers) hold stronger memories of interpersonal loaning incidences.
Morvinski, C., & Shani, Y. (2022). Misaligned mindsets between borrowers and lenders of small interpersonal loans. Organizational Behavior and Human Decision Processes, 169, 104117.
To the full article: https://doi.org/10.1016/j.obhdp.2022.104117
