Abstract
The main objective of this paper is to investigate the determining factors of loan delinquencies from the perspective of borrower attributes and loan characteristics. Empirical results indicated that the borrower-lender distance factor, collateral, education levels as well as availability of a monthly budget are having significant effects on loan delinquencies. On the other hand, level of income and gender have no significant impact on repayment behaviour. Credit is good as it allows the borrowers financial flexibility, however, debt is viewed as bad if it was not managed properly. Therefore, a correct attitude towards credit management and self-discipline can be encouraged to reduce loan default rates.
Highlights
A total of 516 questionnaires collected between 2018 to 2019 with all the required information filled by borrowers from both the local commercial banks and non-bank financial intermediaries in Malaysia were selected for analysis
Even though both types of financial institutions provide similar products and services, non-bank financial institutions are exposed to higher credit risk as their target market are higher leveraged and riskier borrowers who will be charged a higher premium on loans (Kang 2014)
From the 516 samples selected for analysis, 47% of the respondents obtained credit facilities from the commercial banks while the remaining 53% have a loan from the nonbank financial institutions
Summary
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