Determinants of business loan default in Ghana

The initiation, funding, servicing and monitoring of loans by financial intermediaries has been done without regard to some critical factors which could have averted the likelihood of default. The study aimed at measuring the extent that owner-specific, borrower-specific, loan and lender-specific ch...

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Detalles Bibliográficos
Autores: Akwaa Sekyi, Ellis Kofi, Bosompra, Portia
Tipo de recurso: artículo
Estado:Versión publicada
Fecha de publicación:2015
País:España
Institución:Universitat de Lleida (UdL)
Repositorio:Repositori Obert UdL
OAI Identifier:oai:repositori.udl.cat:10459.1/65930
Acceso en línea:http://hdl.handle.net/10459.1/65930
Access Level:acceso abierto
Palabra clave:Borrower-specific characteristics
Default
Financial intermediaries
Lender characteristics
Loan characteristics
Ownership characteristics
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spelling Determinants of business loan default in GhanaAkwaa Sekyi, Ellis KofiBosompra, PortiaBorrower-specific characteristicsDefaultFinancial intermediariesLender characteristicsLoan characteristicsOwnership characteristicsThe initiation, funding, servicing and monitoring of loans by financial intermediaries has been done without regard to some critical factors which could have averted the likelihood of default. The study aimed at measuring the extent that owner-specific, borrower-specific, loan and lender-specific characteristics could determine the probability of loan default. The study used logistic regression for 224 business customers of a bank in Ghana from its nation-wide branches. The study found that owner's extra income (ownership characteristics), multiple borrowing, diversion of loan purpose (borrower characteristics), loan price, loan purpose, loan age, repayment plan (loan characteristics) and underfunding (lender characteristics) significantly determined the probability of business loan default. The overall model predicted up to 78.5% of variations in the likelihood of default. The hierarchy of strong determinants given by their odd ratios were loan purpose (47.9 times), underfunding (19.2 times), diversion of loan purpose (11.7 times) multiple borrowing (9.4 times) and owner's extra income (8.2 times). The study can conclude that financial intermediaries should be wary of the credit granting process taking cognisance of ownership, borrower, loan and lender characteristics especially the significant predictors. Combining quantitative and qualitative variables as determinants of default could be considered in futureWe would like to acknowledge the anonymous bank (staff and customers) for responding to the questionnaires and providing vital information for this research. Again, we are grateful to Dr. Jordi Moreno Gené (Univ of Lleida, Spain), Kwame Oduro Amoako (Univ of Canterbury, New Zealand) and Ernest Yeboah Acheampong (Univ of Grenoble, France) for the peer review work they did before final submission.SC Research Publishing SRL2015info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionapplication/pdfhttp://hdl.handle.net/10459.1/65930reponame:Repositori Obert UdL instname:Universitat de Lleida (UdL)InglésReproducció del document publicat a https://www.jsrpublishing.com/number/1/archive/Junior Scientific Researcher, 2015, vol. 1, núm. 1, p. 10-26cc-by (c) Ellis Kofi Akwaa Sekyi, Portia Bosompra, 2015info:eu-repo/semantics/openAccesshttp://creativecommons.org/licenses/by/4.0/oai:repositori.udl.cat:10459.1/659302026-06-24T12:42:17Z
dc.title.none.fl_str_mv Determinants of business loan default in Ghana
title Determinants of business loan default in Ghana
spellingShingle Determinants of business loan default in Ghana
Akwaa Sekyi, Ellis Kofi
Borrower-specific characteristics
Default
Financial intermediaries
Lender characteristics
Loan characteristics
Ownership characteristics
title_short Determinants of business loan default in Ghana
title_full Determinants of business loan default in Ghana
title_fullStr Determinants of business loan default in Ghana
title_full_unstemmed Determinants of business loan default in Ghana
title_sort Determinants of business loan default in Ghana
dc.creator.none.fl_str_mv Akwaa Sekyi, Ellis Kofi
Bosompra, Portia
author Akwaa Sekyi, Ellis Kofi
author_facet Akwaa Sekyi, Ellis Kofi
Bosompra, Portia
author_role author
author2 Bosompra, Portia
author2_role author
dc.subject.none.fl_str_mv Borrower-specific characteristics
Default
Financial intermediaries
Lender characteristics
Loan characteristics
Ownership characteristics
topic Borrower-specific characteristics
Default
Financial intermediaries
Lender characteristics
Loan characteristics
Ownership characteristics
description The initiation, funding, servicing and monitoring of loans by financial intermediaries has been done without regard to some critical factors which could have averted the likelihood of default. The study aimed at measuring the extent that owner-specific, borrower-specific, loan and lender-specific characteristics could determine the probability of loan default. The study used logistic regression for 224 business customers of a bank in Ghana from its nation-wide branches. The study found that owner's extra income (ownership characteristics), multiple borrowing, diversion of loan purpose (borrower characteristics), loan price, loan purpose, loan age, repayment plan (loan characteristics) and underfunding (lender characteristics) significantly determined the probability of business loan default. The overall model predicted up to 78.5% of variations in the likelihood of default. The hierarchy of strong determinants given by their odd ratios were loan purpose (47.9 times), underfunding (19.2 times), diversion of loan purpose (11.7 times) multiple borrowing (9.4 times) and owner's extra income (8.2 times). The study can conclude that financial intermediaries should be wary of the credit granting process taking cognisance of ownership, borrower, loan and lender characteristics especially the significant predictors. Combining quantitative and qualitative variables as determinants of default could be considered in future
publishDate 2015
dc.date.none.fl_str_mv 2015
dc.type.none.fl_str_mv info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
format article
status_str publishedVersion
dc.identifier.none.fl_str_mv http://hdl.handle.net/10459.1/65930
url http://hdl.handle.net/10459.1/65930
dc.language.none.fl_str_mv Inglés
language_invalid_str_mv Inglés
dc.relation.none.fl_str_mv Reproducció del document publicat a https://www.jsrpublishing.com/number/1/archive/
Junior Scientific Researcher, 2015, vol. 1, núm. 1, p. 10-26
dc.rights.none.fl_str_mv cc-by (c) Ellis Kofi Akwaa Sekyi, Portia Bosompra, 2015
info:eu-repo/semantics/openAccess
http://creativecommons.org/licenses/by/4.0/
rights_invalid_str_mv cc-by (c) Ellis Kofi Akwaa Sekyi, Portia Bosompra, 2015
http://creativecommons.org/licenses/by/4.0/
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv SC Research Publishing SRL
publisher.none.fl_str_mv SC Research Publishing SRL
dc.source.none.fl_str_mv reponame:Repositori Obert UdL
instname:Universitat de Lleida (UdL)
instname_str Universitat de Lleida (UdL)
reponame_str Repositori Obert UdL
collection Repositori Obert UdL
repository.name.fl_str_mv
repository.mail.fl_str_mv
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