Which is safer in the long-term, diffuse debt or concentrated debt? I want to deepen my understanding of risks as posed by debt burdens among actors of an economy. After some literature review, it seems the matter is nuanced; points can be made for both sides. I'll present a few points simply for context.

Diffuse

If debt burdens are distributed more uniformly (diffuse), then credit can be extended to many SMEs and likely to benefit employment and other long run growth drivers. Also, less concentrated risk may spread out debt burdens and make servicing more manageable.

Concentrated

If debt burdens are concentrated, then regulators will be able to pursue more effective macroprudential policies. For example, entrusting asset management companies to take care of NPLs and free up bank resources so they may lend more.

Question

Is this a debated position in the broader field of economics or is there clear theoretical framework and/or empirical evidence for one being better than the other for "safe" long run economic growth?
I do not think this question can be answered.

Firstly, the statement “ For example, entrusting asset management companies to take care of NPLs and free up bank resources so they may lend more.” does not follow. There are some administrative advantages to having concentrated borrowers, but this statement does not capture them.

We cannot choose the distribution of borrower size without choosing the distribution of firm size. So this question is: should societies aim for concentrated industries, or break them up? This is a large question, for example, the study of anti-trust law. I don’t think one can summarise that area without just posting an opinion.

If we just want to look at historical examples of debt crises, we can find crises both with distributed and concentrated borrowers. Qualitatively, they will look different, but it will be a matter of opinion which will be safer. E.g. concentrated firms pose the risk of a large planning error. However, it is easier to intervene into one firm. Which is “safer”?