Frailty correlated default on retail consumer loans in Zimbabwe

There has been increasing availability of consumer credit in Zimbabwe, yet the credit information sharing systems are not as advanced. Using frailty survival models on credit bureau data from Zimbabwe; this study investigates the possible underestimation of credit losses under the assumption of independence of default event times. The study found that adding a frailty term significantly improved the models, thus indicating the presence of unobserved heterogeneity. The major policy recommendation is for the regulator to institute appropriate policy frameworks to allow robust and complete credit information sharing and reporting as doing so will significantly improve the functioning of the credit market.