On the modelling of prognosis from delinquency to normal performance on retail consumer loans

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Abstract

This paper addressed the neglected area of modelling recovery from delinquency to normal performance on retail consumer loans taking into account the recurrent nature of delinquency and also including time-dependent macroeconomic variables. Using data from a lending company in Zimbabwe, we provided a comprehensive analysis of the recovery patterns using the extended Cox model. The findings vividly showed that behavioural variables were the most important in understanding recovery patterns of obligors. This confirms and underscores the importance of using behavioural models to understand the recovery patterns of obligors in order to prevent credit loss. The study also points to the urgent need for policy measures aimed at promoting economic growth for the stabilisation of consumer welfare and the financial system at large.

Original languageEnglish
Pages (from-to)264-287
Number of pages24
JournalRisk Management
Volume18
Issue number4
DOIs
Publication statusPublished - 1 Dec 2016

Keywords

  • consumer credit risk
  • counting process
  • delinquency
  • non-performing loans
  • recovery
  • recurrent events
  • survival analysis

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