Repayment History Research Articles

Determinants of firms’ default on unsecured loans in the P2P crowdfunding market

We investigate the payback performance of small businesses’ funded loans, and its determinants, in the Peer-to-Peer (P2P) lending crowdfunding market. We do so by analysing a dataset of 1000 small businesses’ unsecured funded loans, via the American online P2P lending funding website Prosper.com. As these loans are unsecured, interest rates are relatively high (18.5% on average in our data base). As a result, payback is by no means straightforward. Indeed, we find 27% of all funded loans in our sample to default. Hence, it is particularly important in this market to know which factors determine payback performance. A novelty of our paper is that we are able to distinguish empirically between new and established firms in this market. Our results highlight that also in P2P lending, borrower reputation — stipulated by credit grade and repayment history — continues to be the single most dominant determinant of payback over loan default, especially for established firms. However, in contrast to conventional financing theory, we found that borrowers’ credit grade is only weakly relevant in determining risks of default of new businesses and that new firms are not more likely to default when compared to established firms. Selection effects may play a role here, in that only high-risk established firms look for unsecured online P2P finance as they are more likely than lower risk established firms to have been unable to get finance in the more traditional markets. This suggests that the liability of newness does not hold in this market. Nevertheless, among new firms, and in contrast to established firms, inclusion of a picture in the loan application was found to be an additional quality signal, positively associated with payback performance. This suggests the importance of visual information as a means of reducing uncertainty and signalling lower risk to financiers.

Research on Evaluation of Financial Risks in Agricultural Product Supply Chains Based on An Improved DEMATEL Method

In order to improve the rationality, accuracy, and timeliness of decisions on financial risks in agricultural product supply chains, it is necessary to evaluate and control these risks sensibly. In this paper, research is conducted on financial risk factors in agricultural product supply chains, and on this basis a financial risk evaluation index system for such supply chains is built in four identified dimensions – credit risk, market risk, pledge risk, and supply chain relation risk. Next, the weights of risk indexes are measured by means of combined weighting based on subjective F-AHP method and objective CRITIC method. The final risk weight coefficients are then derived with EDAS method. With the aid of an improved DEMATEL method, the agricultural product supply chain financial risk factors are analyzed, and comprehensive impact degrees of different risk factors in agricultural product supply chains are calculated. The calculation results show that financial risks in agricultural product supply chains are highly influenced by cooperation level, performance record, and financial standing and repayment history of borrowing organization. Based on the findings of this paper, appropriate financial risk management and control measures can be developed in light of the key risk factors identified in agricultural product supply chains, thereby providing a valuable reference for financial risk control in agricultural product supply chains.

Unleashing the Power of Machine Learning: A Comparative Study of Classification Algorithms for Credit Risk Assessment

Credit risk assessment is a critical task in the financial industry, enabling lenders to evaluate the likelihood of default and make informed lending decisions. This paper presents a comprehensive comparative study of classification algorithms for credit risk assessment using machine learning techniques. The paper commences by providing an overview of the importance of credit risk assessment and the challenges faced by traditional methods. It then delves into the exploration of various machine learning algorithms, including logistic regression, decision trees, random forests, support vector machines, and neural networks, highlighting their potential in credit risk assessment. The objective of this study is to compare the performance of different classification algorithms in credit risk assessment. To achieve this, a dataset comprising historical credit data, including borrower information, financial indicators, and repayment history, is collected. The dataset is preprocessed to handle missing values, outliers, and feature engineering is applied to extract relevant predictors. A comprehensive evaluation is conducted, considering performance metrics such as accuracy, precision, recall, and area under the receiver operating characteristic curve (AUC-ROC). The comparative study provides insights into the strengths and weaknesses of each algorithm and their suitability for credit risk assessment in different scenarios. The results of this study contribute to the existing literature on credit risk assessment and offer practical guidance for financial institutions in selecting appropriate machine learning algorithms. Furthermore, the paper discusses potential challenges and limitations associated with the application of machine learning in credit risk assessment and proposes future research directions.

Potential of Microfinance Self-Help Group Lending Approach on Street Vendors’ Access to Financial Resources: Experience from Arusha, Tanzania

This paper aimed to assess the potential of microfinance Self-Help Group Lending (SHGL) approach on street vendors’ access to financial resources. The study was conducted in Arusha district in Arusha City Tanzania. The study was guided by Social Capital Theory (SCT) and Life-Cycle Hypothesis Theory (LCHT). A cross-sectional research design was used where a Sample size was purposively selected at one point in time based on one’s engagement in group lending activities. A Cochran (1977) formula was used to calculate the sample size for the unknown population where 400 street vendors were reached. Questionnaire and key informants’ interviews were used to collect primary data. Quantitative and qualitative data analysis supplemented each other to enable in-depth description of the potential of microfinance SHGL approach on access to financial resources by street vendors. Findings revealed that there is a relationship between group lending and access to financial services at Pearson Correlation 0.782. However, Nature of the business of the borrowing member, individual repayment history, insufficient savings by members, entrepreneurial skills and uncertainty of the market safety and operating environment hinders group lending operations. It is recommended that local authorities and formal banking systems should open microfinance windows for small business to access financial resources to enable their business operations.

Drivers of lending decision in peer-to-peer lending in Malaysia

PurposeDespite the emergence of peer-to-peer (P2P) lending in Malaysia, there is a knowledge gap on what drives the lending decision of P2P lending in the emerging Malaysian market. This research investigates how borrower's loan tenure, funding purpose, verified documents, accumulated transaction and repayment history, age, trustworthy and geographical resemblance affect likelihood of lending decision in P2P platform.Design/methodology/approachUsing snowball sampling, survey data was collected from 300 online banking users who were willing to invest in online P2P platform from different states in Malaysia (i.e. Selangor, Malacca, Johor and Negeri Sembilan). For estimation, regression analyses were estimated.FindingsThe findings suggest that borrower's loan tenure and borrower's age increase the probability of lending in online P2P platform, while funding purpose of credit card reduces the likelihood of lending in the P2P platform. The findings contribute to the signalling theory.Practical implicationsThe findings imply that borrowers need to concentrate on loan tenure and clearly indicate their age in the listing in order to increase the funding probability. Moreover, they are suggested not to submit listing for credit card as funding purpose.Originality/valueThis study is first in its nature about P2P lending in Malaysia and the possible factors that influence lending decisions in this new financing platform.

A CONCEPTUAL MODEL OF CREDIT SCORECARD IN PRODUCTIVE LOAN

This study is aimed to discuss variables involved in credit scorecard assessment for granting agricultural credits. To get the variables, authors approached with the synthesizing method or Knowledge Synthesis Method from 25 papers related to the credit scorecard development in SMEs and Agriculture. This study used 5 C’s of credit concept to group related variables and eliminated which are not. It is found that from the five aspects of 5C’s, the character aspect consists of management, relationship, credit history, good corporate governance (GCG), behavior, and innovation. The capacity aspect consists of liquidity, profitability ratio, indebtedness degree, repayment history, activity ratio, financial growth, and expense ratio. The capital aspect consists of one indicator, namely capital structure. The conditioning aspect comprises of external factors of PESTEL, industry, and scope of a region in terms of monitoring. The collateral aspect consists of one indicator, which is a guarantee. All of these indicators will be a basic determinant of variables to appraise credit risk quality of a borrower in the agriculture sector. The limitation of this study is the scope limitation of conducting literature synthesize in particular papers which are related to appraising borrowers who are proposing productive loan, particularly in SMEs and the agriculture sector. The finding of this study will be useful for financial institutions that are responsible for developing assessments for borrower candidates in SMEs or the agriculture sector. Further process of research is eligible to be conducted, either qualitative or quantitative, in order to validate and improve the findings in this paper.

Financial Management of Micro, Small, and Medium Enterprises (SMEs) Kredit Usaha Rakyat (KUR) Micro Recipients

Business capital problem should be considered for SMEs. Kredit Usaha Rakyat (KUR) is one solution to business capital problem faced by SMEs in Indonesia. This study aims to determine the implementation of financial management by comparing the application on the receivers KUR micro have good credit repayment history and KUR recipients who have a history of credit payments are classified into the list of collectability on customers of Bank Mandiri Malang. This study used qualitative research methods, as for the type used a case study observation which the emphasis was on the ability of researchers to use observation techniques in research activities.

EFFECTIVENESS OF CREDIT REFERENCE BUREAU ON ENHANCING FINANCIAL PERFORMANCE

The study examined the effectiveness of credit reference bureau on the financial Performance in financial institutions in Nakuru County. The Study used a survey study research design. The population of the study involved 210 employees of financial institutions in Nakuru County. The study obtained primary data by the use of self- administered Questionnaires while review of related literature was used to collect secondary Data. The Primary data was analyzed using descriptive statistics. The researcher used the statistical Package for Social Sciences (SPSS) version 17 in analysis for the Study. The findings of the study were expected to provide a source of information for banking professionals to understand, control and to reduce the impact of increasing non-performing loans from the economy due to credit risk. CRB has played a significant role in as far as risk identification and monitoring is concerned. Moreover, CRB has significantly helped reduce the rate of loan default in the economy as well as increasing credit access. Lastly, it has led to a reduction in the level of moral hazard in financial institutions in Nakuru county.It has been deduced that clients are not getting appropriately rewarded for having a good credit repayment history. Measures need to be put in place to ensure that clients get an advantage for promptly repaying their loans in terms of the interest rate they pay. It is hoped that this will help cushion those with a good credit rating from CRB hence increasing efficiency in the banking sector.

Firmss Strategic Choice of Loan Delinquencies

I analyze the repayment decisions of firms with multiple loans that, for liquidity constraints or strategic reasons, stop making payments in some but not all their loans. Using a sample of commercial loans from Colombia over the period 2002:03-2012:06, I find that firms are less likely to stop making payments on loans granted by banks with which they have long relationships and by banks with which they have a clean repayment history. These results suggest that firms are concerned with losing the benefits gained through the relationship. I also find that firms are more likely to stop making payments on loans from foreign banks when compared to domestic banks, and equally on loans from state owned banks when compared to private banks. This suggests that the ability and willingness of the bank to punish the firm for misbehaving play an important role in a firm’s decision. Overall, the results suggest that firms assess their delinquency choices based on their perceived ability to obtain new loans in the future.

Factors Influencing the Lending Decision of Commercial Banks in Bangladesh

Lending money is risky and for that reason banks do not want to grant credit to those borrowers who are not able to repay the loan. Credit risk depends on some factors. To identify these factors banks make a preliminary analysis of the credit worthiness and solvency of the borrower. The current study is an attempt to bring out the concerned factors that have great affect on the banker's perception about loan decision. For achieving this objective, sample size of 47 individual respondents (Bankers) has been taken and the analysis was carried out using Factor Analysis in order to capture the Bankers perception as to take a loan decision. The result of the analysis has discovered nine underlying factors such as Project's Potentiality, Experience, Viability of Project, Guarantee, Risk, Repayment History, Priority Sector, Age and Relationship with the Bank on the basis of which Bankers make the decision about the loan approval. The study has suggested that the loan applicant should be aware of the preferences of the bankers in case of loan decision making.

Determinants of Loan Repayment: A Study of Rural Women Fish Traders in Akwa Ibom State, Nigeria

The paper estimated the loan repayment index and examined the determinants of loan repayment from a sample of 80 rural women fish traders obtained through a multi-stage sampling in four selected markets in Akwa Ibom State, Nigeria. Data were collected in May, 2013 and analyzed using descriptive and inferential statistics. Findings revealed that informal sources of loan were popular among the fish traders. The result of the probit analysis revealed that educational level, interest rate charged, spouse income, marketing experience, personal income of traders, non fish marketing income and household size were the major determinants of loan repayment in the study area. The reasons for loan default in order of importance were; family commitment, untimely loan disbursement, high interest rate charged as well as unforeseen circumstances. The study further revealed that only 63 percent of the total loan accessed by respondents was repaid. The paper recommended the evolution of a more proactive loan monitoring procedure by lenders such as verification of the loan worthiness and previous loan repayment history of borrowers before granting loans, encouraging the patronage of formal credit sources, pursuing policies that would reduce household sizes as well as the setting up of loan delinquent court to prosecute defaulters as the way out. Original Research Article A Article Article British Journal of Economics, Management & Trade, 4(4): 541-550, 2014 542

The credit relationship betweenHenryIIIand merchants ofDouai andYpres, 1247–70

This article looks at an important but neglected aspect of medieval sovereign debt, namely ‘accounts payable’ owed by theCrown to merchants and employees. It focuses on the unusually well‐documented relationship betweenHenryIII,King ofEngland between 1216 and 1272, andFlemish merchants from the towns ofDouai andYpres, who provided cloth on credit to the royal wardrobe. From the surviving royal documents, we reconstruct the credit advanced to the royal wardrobe by the merchants ofYpres andDouai for each year between 1247 and 1270, together with the king's repayment history. The interactions between the king and the merchants are then analysed. The insights from this analysis are applied to the historical data to explain the trading decisions made by the merchants during this period, as well as why the strategies of theYprois sometimes differed from those of theDouaissiens.

Shamba Maisha: A pilot study assessing impacts of a micro-irrigation intervention on the health and economic wellbeing of HIV patients

BackgroundHIV/AIDS negatively impacts poverty alleviation and food security, which reciprocally hinder the rapid scale up and effectiveness of HIV care programs. Nyanza province has the highest HIV prevalence (15.3%), and is the third highest contributor (2.4 million people) to rural poverty in Kenya. Thus, we tested the feasibility of providing a micro-irrigation pump to HIV-positive farmers in order to evaluate its impact on health and economic advancement among HIV-positive patients and their families.MethodsThirty HIV-positive patients enrolled in the Family AIDS Care and Education Services (FACES) program in Kisumu, Kenya were provided a micro-financed loan to receive an irrigation pump and farming guidance from KickStart, the developer of the pump. Economic data, CD4 counts, household health and loan repayment history were collected 12 months after the pumps were distributed.ResultsMean annual family income increased by $1,332 over baseline. CD4 counts did not change significantly. Though income increased, only three (10%) participants had paid off more than a quarter of the loan.ConclusionsWe demonstrated the feasibility of an income-generating micro-irrigation intervention among HIV-positive patients and the collection of health and economic data. While family income improved significantly, loan repayment rates were low- likely complicated by the drought that occurred in Kenya during the intervention period.

Default, Settlement, and Repayment History: A Unified Model of Sovereign Debt

This paper proposes a dynamic model of sovereign debt that combines default, settlement, and repayment history. The model addresses two questions: 1) how level of debt and income proflle afiect the length of time a country in default is excluded from the international credit market, and 2) how repayment history afiects the credit limit and interest rate lenders ofier, and the borrower’s incentive to default. In the model, borrowers weigh the beneflts from defaulting against the penalties associated with it, namely a lengthy exclusion from the market and a potential deterioration in the credit terms. The paper models the settlement as a random process to re∞ect ine‐ciencies that arise due to the existence of private information, but conditions the probability of a settlement on the portion of the defaulted debt borrowers agree to repay. The model incorporates repayment history (i.e., the number of years a country has been active in the international credit market) into the information set used by lenders. Quantitative analysis shows that the model can replicate some key stylized facts of sovereign debt: 1) settlement ofiers depend positively on a debtor’s current income level and negatively on its level of debt; 2) the debt-to-GDP ratio that new borrowers or serial defaulters can support is well below the ratio that proven debtors can safely manage; 3) the probability of default is larger for debtors with recent payment di‐culties; 4) once a country defaults, it takes many years of perfect repayment and low levels of debt for that country to gain continuous access to international credit markets at low cost; this process is slow and backsliding into default is di‐cult to avoid.

Financing Foodstuff Marketing In Akwa Ibom State, Nigeria: Some Considerations

The introduction of micro credit schemes to provide financial services to the small operators in the food marketing industry deserve some caution because available literature confirms that formal credit programme involving small operators in the agricultural sector have low repayment history. This study assessed how micro finance schemes directed at the small operators in the food marketing industry can package result oriented financial services for the success of the lending schemes. The report is based on panel data obtained in a research involving 116 food retailers in Akwa Ibom State. The simple random sampling procedure was used to select the respondents. Descriptive statistics such as means and percentages, and the multiple regression analytical technique were used to analyze the data. The results show that among the palm oil, grains, vegetable and seafood sellers transport cost had significant effects on the marketing margin, are positively related but unit increase in their numbers adds less than proportionately to the marketing margin. Among the palm oil and grain sellers, the quantity of produce handled had significant effect on, are positively related to, but bring about a less than proportionate increase to the marketing margin. For seafood and vegetable sellers, more margin can be ensured if more quantity of the seafood are handled but efforts must be made to assist the traders handle such quantity that will bring about more than proportionate increase in the marketing margin. Younger sellers make better margin comparatively. Micro finance schemes directed at the operators in the food marketing sub sector must be designed to provide financial and non-financial services that are accompanied with appropriate package of dynamic and static incentives to motivate and compel loan beneficiaries to repay loans. The credit package must include efforts to direct credit to younger sellers, reduce the transport cost and increase the quantity of produce handled so as to ensure that the operators earn satisfactory margins to repay loans. More importantly regular repayment schedule designed to match the time pattern of earnings of the beneficiaries and appropriate research instrument must be packaged alongside these financial and non-financial services to add impetus to loan repayment, identify problems and solutions that can make the micro-finance scheme a going concern. KEY WORDS: Micro finance, marketing margin, Loans repayment. Global Journal of Agricultural Sciences Vol.3(1&2) 2004: 35-40

Making a Market: The UK Retail Financial Services Industry and the Rise of the Complex Sub-Prime Credit Market

Except as a technical topic within finance or economics, credit is a much-neglected topic in the social sciences. This paper is concerned with a particular growth and development in the field of credit that appears to have intensified over the last couple of decades. Since the introduction of credit scoring, large sections of the population have been deprived of borrowing money from the mainstream institutions and this has led to the growth and differentiation of the sub-prime market. One part of this market concentrates on consumers with comparatively low incomes and offers loans of limited denominations and collects the repayments door-to-door on a weekly basis. This is called the traditional sub-prime market for credit. Here, interest rates are much higher than in the mainstream market, largely to cover the costs of household collections but also to insure against default. A second part of the market is what is termed the complex subprime market, where customers are categorized as ‘non-standard’ because of their financial history, which may or may not include earning very low incomes. The distinction between these two markets coincides with that between the ‘old’ and the ‘new’ economy. The complex sub-prime market largely distributes its service electronically through the Internet and telephone call centres, whereas the traditional sub-prime market is dependent upon a face-to-face delivery system. In place of a standard pricing system, the complex sub-prime companies operate a risk pricing strategy related to the customer's repayment history. The paper examines these two sub-prime markets from the point of view of their evolution, their importance to customers, and issues of education and regulation.