Frailty correlated default on retail consumer loans in Zimbabwe

Research output: Contribution to journalArticle

Abstract

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.

Original languageEnglish
Pages (from-to)257-270
Number of pages14
JournalInternational Journal of Applied Decision Sciences
Volume12
Issue number3
DOIs
Publication statusPublished - 1 Mar 2019

Fingerprint

Loans
Frailty
Zimbabwe
Correlated defaults
Retail
Credit
Information sharing
Unobserved heterogeneity
Consumer credit
Functioning
Survival model
Credit markets

Keywords

  • Credit risk
  • Default clustering
  • Expected losses
  • Frailty
  • Survival models
  • Unobserved heterogeneity
  • Zimbabwe

Cite this

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abstract = "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.",
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Frailty correlated default on retail consumer loans in Zimbabwe. / Chamboko, Richard; Bravo, Jorge M.

In: International Journal of Applied Decision Sciences, Vol. 12, No. 3, 01.03.2019, p. 257-270.

Research output: Contribution to journalArticle

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