Prediction of loan default

Abstract

This study was concerned with two primary objectives.First the study was carried out to establish the extent to which variable currently considered by corporation in assessing potentia commercial loanees can discriminate between defaulters and non-defaulters. Secondly, to develop models to assist management in evaluating potential lonees. A random sample of 269 loanees (131 defaulters and 138 non-defaulters) was selected from the Corporation's list of loanees for these purposes. This sample was further spirit on a random basis into sub-samples of 187 and 82 loanees. Details of the personal characteristics, nature of business, security offered, etc. for each of these loanees were then obtained from Loan Application Forms. Several variable combinations were developed from these details and used to develop various models.................................................................