Loan Delinquency: Some Determining Factors

Chong, Fennee

doi:10.3390/jrfm14070320

Cited by 7 publications

(10 citation statements)

References 17 publications

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“…, 2018). In recent years, researchers have started to examine debt delinquency behavior in developing countries such as Malaysia (Chong, 2021), Thailand (Chantarat et al. , 2020) and Tunisia (Mora and Prior, 2018).…”

Section: Previous Research Conceptual Discussion and Hypothesesmentioning

confidence: 99%

“…The findings of this study will be helpful for furthering the theory development of consumer debt behavior and informing practices in consumer finance businesses in not only developed countries but also developing countries. Credit markets have developed along with economic development, and consumer debt behavior has become an important research topic in developing countries as well such as Brazil (Abrantes-Braga and Veludo-de-Oliveira, 2020), China , Malaysia (Chong, 2021), Thailand (Chantarat et al, 2020) and Tunisia (Mora and Prior, 2018).…”

Section: Good Debt Bad Debtmentioning

confidence: 99%

“…With panel data in the USA, researchers find interaction patterns between lenders and borrowers in terms of delinquent behavior (Athreya et al, 2018). In recent years, researchers have started to examine debt delinquency behavior in developing countries such as Malaysia (Chong, 2021), Thailand (Chantarat et al, 2020) and Tunisia (Mora and Prior, 2018).…”

Section: Debt Pressure and Debt Delinquencymentioning

confidence: 99%

“…Credit markets have developed along with economic development, and consumer debt behavior has become an important research topic in developing countries as well such as Brazil (Abrantes-Braga and Veludo-de-Oliveira, 2020), China (Xiao et al. , 2021), Malaysia (Chong, 2021), Thailand (Chantarat et al. , 2020) and Tunisia (Mora and Prior, 2018).…”

Section: Introductionmentioning

confidence: 99%

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Good debt, bad debt: family debt portfolios and financial burdens

Xiao

Yao

2022

IJBM

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PurposeIn recent decades, research on consumer debt and well-being is emerging. However, research on the potential effect of debt portfolios on family financial well-being is limited. The purpose of this study is to fill this research gap by examining the potential effect of debt portfolios on family financial well-being, measured by three indicators of progressive financial burdens. These indicators include debt pressure (debt payment to income ratio >40%), debt delinquency (60+ days late for debt payments) and insolvency (total liability > total asset). Debt portfolios refer to various combinations of mortgage, credit card, vehicle, education and other loans.Design/methodology/approachWith data from the 2019 Survey of Consumer Finances in the USA, multivariate logistic regressions are used to identify specific debt types, consumer backgrounds and financial capability factors that are significantly associated with debt burden indicators. The findings are used to create a table demonstrating warning debt portfolios that may lead to undesirable financial outcomes.FindingsHoldings of different types of debts are associated with different financial burdens. Specifically, holdings of three types of debts (mortgage, vehicle and other debts) tend to increase debt pressure; holdings of two types of debts (education and other debts) tend to increase debt delinquency; and holdings of four types of debts (mortgage, credit card, education and other debts) tend to increase insolvency. These results are used to construct warning debt portfolios that show greater chances of undesirable financial outcomes. Among them, the top warning portfolio for debt pressure is the combined holding of mortgage-vehicle-other debts; for debt delinquency is the holding of education-other debts; and for insolvency is the holding of mortgage-credit card-education-other debts.Research limitations/implicationsThis study is limited by using only cross-sectional survey data to examine associations between debt portfolios and financial burdens. To examine the causality of debt portfolios on financial burdens, appropriate panel data are necessary, which is a direction for future research. In addition, this study used data from only one developed country. In future research, data from more countries, including both developed and developing countries, should be analyzed to verify if similar relationships exist among families in other countries.Practical implicationsResults of this study have implications for practitioners in banking and other financial institutions. The study presents a comprehensive list of debt portfolios in the order from high risk to low risk in terms of financial burdens. Banking and other financial service professionals can use the information to help their clients make informed borrowing decisions, predict their debt burdens and offer early preventions based on their clients' debt portfolios. Marketing strategists can use the information for effective segmentation and promotion purposes.Originality/valueThis study utilizes a new concept, debt portfolios and examines its associations with family financial burdens. Financial burdens include three indicators that are seldom used together in previous research. These indicators conceptually indicate various severity levels of debt burdens. This study also presents a conceptual discussion on the association between debt portfolios and financial burdens and provides a better understanding of consumer debt behavior and its consequences. The warning debt portfolios constructed based on the findings have direct managerial implications for banking and other financial service professionals.

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Section: Previous Research Conceptual Discussion and Hypothesesmentioning

confidence: 99%

Section: Good Debt Bad Debtmentioning

confidence: 99%

Section: Debt Pressure and Debt Delinquencymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Good debt, bad debt: family debt portfolios and financial burdens

Xiao

Yao

2022

IJBM

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“…By devising appropriate risk management policies, possibly MFIs would ably hedge against the risks associated with lending to the poor. The MFIs attempt to manage risk associated with lending through character assessment of prospective loan applicants (Chong, 2021), strict loan monitoring schedules (Castellani, Niño-Zarazua, Pujia, & Garofalo, 2021), regulating the loan amounts advanced that are progressively increased depending on how the group performs on its earlier repayment schedules and pre-saving requirements (Mendelson, Dassy, Erice, Rozas, & Afonso, 2020). From the case studies conducted by the Grameen Foundation during Covid-19, savings services were found to be an effective way of building the vulnerable resilience to shocks (Foundation Grameen Credit Agricole, 2021).…”

Section: Microfinance Risk Management and Financial Performancementioning

confidence: 99%

Microfinance risk management, social mission and financial performance during the Covid-19 pandemic in Uganda

Kizza¹,

Samali²

2022

AJF

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Introduction: Microfinance is an economic tool promoted to extend financial services to the vulnerable groups excluded from the formal financial institutions. The Covid-19 pandemic containment measures disrupted the economic activities of the poor and made it hard for microfinance institutions (MFIs) to reach out to poor. Purpose: This paper sets out to investigate the relationship between microfinance institutions risk management, social mission and financial performance of MFIs during the Covid-19 pandemic in Uganda. The study objectives were to investigate the relationship between risk management and financial performance of MFIs during the Covid-19 pandemic in Uganda and to investigate the relationship between the microfinance social mission and financial performance of MFIs during the Covid-19 pandemic in Uganda. Methodology: This was a cross sectional study that involved 53 respondents conveniently selected from six (6) MFIs from Central Uganda working in the area of credit. The data was collected during the late period of the year 2021 using a self –administered questionnaire and analysed using STATA 12 to generate both descriptive and inferential statistics. Results: The study findings revealed the existence of a significant positive relationship between risk management and the social mission (0.88; ); risk management and financial performance (0.91; ); the social mission and financial performance (0.88; ). Collectively, the predictor variables explain 85% of the variation in microfinance financial performance (Adjusted R-squared 0.85; p<0.00). Recommendations: It is recommended that while designing risk management strategies, the focus be put on the social mission that will translate in the attainment of the financial objective. Attempts should be made by policy makers to help MFIs design strategies that integrate the dual bottom line with the triple bottom line.

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