This website uses cookies to ensure you have the best experience. Learn more

Credit Scoring Models Essay

1747 words - 7 pages

1.4 Objectives of the study

I. To determine borrower-related factors hindering effectiveness of credit scoring models used by financial institutions’ in kericho munipa;ity
II. To investigate human related factors hindering application of credit scoring models used by credit lenders while advancing loans
III. To determine the efficacy of credit scoring models used by commercials banks in kericho municipality

1.5 Research questions
I. What are borrower-related factors hindering effectiveness of credit scoring models used by financial institutions’ in kericho munipa;ity
II. What are human related factors hindering application of credit scoring models used by credit lenders while ...view middle of the document...

9 Conceptual framework
Conceptual framework is set of coherent ideas or concepts organized in a manner that makes them easy to communicate to others. A framework can help us to explain why we are doing a project in a particular way. It can also help us to understand and use the ideas of others who have done similar things. Below is framework that explains to us how to establish the factors hindering the effectiveness of loans scoring models in Kenya.
Dependent variables independent variable
skills

Borrower related factors

The borrower related factors may be economic, or attitudinal. Economic factors include low employment income which has an effect on the ability to qualify for credit facilities offered by mainstream credit institutions. Attitudinal factors may include fear of borrowing especially from mainstream credit institutions.

Lender related factors include the terms and conditions of credit facilities in particular the interest charged, repayment terms, security/collateral requirements and unwillingness to lend to particular classes of borrowers due to credit risk considerations.

Human related factors
These are the human effects on the scoring models which affect the effectiveness of the scores obtained by the scoring models hence affecting the entire credit worthiness of the customers. These include corruption, nepotism and other human related factors.
Credit scoring models
Credit scoring models are used globally to process a variety of credit products (including SME loans). According to knowledgeable experts such as the Credit & Management
Systems, Inc, models offer considerable institutional and economic benefits including:
• Speed – statistical scoring models are fully automated and allow for faster, more
efficient credit decisions. Lesser automated models still save substantial time and
expense.
• Accuracy – if applied consistently with proven predictive factors, models can be
highly accurate.
• Quantifiable process – creditors no longer analyze one credit at a time; data is
easily captured and client factors are compared with desired measures and peer
groups, which is important for efficient SME evaluations; it is also less subjective.
• Fewer bad debts – when managed effectively, good models result in fewer credit
problem loans; loan defaults are predicted with greater certainty so high vs. low
risk requests are clearly distinguished; it also enhances portfolio management.
• Regulatory oversight – validated scoring models are routinely approved by
regulators and will play a key role with Basel II IRB approach.

CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.0 Introduction
This chapter explains the sampling procedures which will be adopted, the research design, methods of data collection, data analysis and interpretation and the presentation of the data.

3.1 Research Design
This study will adopt a survey design. This design involved describing of the unit in details and...

Other Papers Like Credit Scoring Models

Co-Op Training Essay

5883 words - 24 pages commonly in the form of property. Credit scoring models also form part of the framework used by banks or lending institutions grant credit to clients. For corporate and commercial borrowers, these models generally have qualitative and quantitative sections outlining various aspects of the risk including, but not limited to, operating experience, management expertise, asset quality, and leverage and liquidity ratios, respectively. Once this

Įmonių Kredito Rizikos Vertinimo Modelių Analizė

2354 words - 10 pages the essential elements of today's financial crisis. Financial institutions face an increasing credit risk and the constant need to improve their risk management system, invent and develop new methods which would contribute to the effective development. The article examines the concept of credit risk and the main credit risk models and methods, i.e. both ranking and the “Scoring” system and the mathematical (structural and reduced form) credit risk models.

Factors That Affectedfactors That Affect People to Have More Than One Credit Cards

4701 words - 19 pages FACTORS THAT AFFECT PEOPLE TO HAVE MORE THAN ONE CREDIT CARDS Abstract Credit card is only form of payment card that offers a revolving line of credit in addition to its function as a means of electronic payment. Currently, the number of credit cards in circulation in Indonesia is growing rapidly until it reached 14.7 million cards in 2011. This becomes higher since most of the credit card customers holding more than one card. As the

Army

1546 words - 7 pages . Answers without working may not gain full credit. Total This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2015 Pearson Education Ltd. Printer’s Log. No. P44845A W850/R6683/57570 5/1/1/1/1/ Turn over *P44845A0124* 1. Each of 60 students was asked to draw a 20° angle without using a protractor. The size of each angle drawn was measured. The results are summarised in the box

Predicting Financial Stress - Home Depot/Lowes

2054 words - 9 pages confident of selling at a price close to its fundamental value if faced with a sudden and unexpected need for cash. There are a number of widely accepted bankruptcy models commonly used by corporate credit officers to assess their exposure, both academic and practical, which are based on accounting factors that have been found to be indicative of impending bankruptcy. Measures of liquidity, leverage and profitability have formed the basis

Data Mining

1352 words - 6 pages possibilities. Predictive analytics is the business intelligence technology that produces a predictive score for each customer or other organizational element. Assigning these predictive scores is the job of a predictive model which has, in turn, been trained over your data, learning from the experience of your organization. (Impact, 2014) The usefulness of predictive scoring is obvious. However, with no predictive model and no means to score

Read the Case Study Can Detroit Make the Cars Customers Want? and Answer the Following Questions:

2605 words - 11 pages customers with credit cards, personal loans, mortgages, deposit, wealth management services and corporate finance. The Next Generation project is a SDLC project focused on retail and business customers to improve and enhance the Credit Card Application Processing System. This system will enable bank to integrate reliable framework for growing database which includes modules like Data Warehousing, Quality Control (QC), Scoring, Policy and Contact Point

Iim Ranchi Case

5458 words - 22 pages 08-076 August 11, 2008 E-commerce at Yunnan Lucky Air Inaki Berenguer, Cai Shijun, Li Liang, Liu Jing, Ningya Wang Preserve the essence of traditional Chinese culture while learning from successful models of the world. - Yunnan Lucky Air, statement of corporate culture Fortune had favored Yunnan Lucky Air. Four years after its founding in 2004, Lucky Air had grown into a US$104.3 million (RMB720 million) low-cost airline, serving domestic

E Commerce

5425 words - 22 pages 08-076 August 11, 2008 E-commerce at Yunnan Lucky Air Inaki Berenguer, Cai Shijun, Li Liang, Liu Jing, Ningya Wang Preserve the essence of traditional Chinese culture while learning from successful models of the world. - Yunnan Lucky Air, statement of corporate culture Fortune had favored Yunnan Lucky Air. Four years after its founding in 2004, Lucky Air had grown into a US$104.3 million (RMB720 million) low-cost airline, serving

What Is The Benefit And Challenges In Moving From Single Last Click Attribution To Multi-Channel Attribution Modelling

7741 words - 31 pages these channels towards sales, attribution modelling is applied. Attribution modelling is a rule, or a set of instructions, which determines how credit for sales and conversions is assigned to touch-points in the customer journey (Burcher, 2012). Two major categories of attribution models are available to marketers, which are single last-click attribution and MCAMs. Last-click attribution modelling Last-click attribution model is that the

Auditing Standards

7302 words - 30 pages strength of acceptable credit customers. Credit scoring xxxi) Collection policy- diligence used to collect slow paying accounts }) Credit period and discount policies will be the major determinant of the eventual size of the receivables balance ~) In making an indidivdual credit decision, management must determine the level of credit risk of the customer based on pior records of payment, financial stability, current

Related Essays

Enlgish Essay

3364 words - 14 pages . |   | Duration: 1 hr | Scoring: 25 | Points Earned: _____ | Lesson 3.4: Doing Science: Ecosystems and Natural Selection | (Documents: Key Terms) | Activity 3.4.1: Study - Birds on an Island | (Documents: Study Sheet) | Learn about using simulations models and other experimental techniques |   | Duration: 40 min |   |   | Activity 3.4.2: Quiz - Birds on an Island | Take a quiz to assess your understanding of the material

Framework For Financial Statement Analysis

3444 words - 14 pages the financial distress (or credit) score, see what range it is in--good, bad or indifferent--and then decide on an appropriate action. You need to keep in mind that most scoring models are based on statistical relationships and they may have a significant level of error associated with them. Let me give you an analogy. I live in Phoenix, Arizona. When I go to bed, I can predict with a high degree of accuracy that the sun will shine tomorrow. I

Credit Risk Management Essay

4703 words - 19 pages * Delegation of loan power * Selective monitoring * Ensuring quality * Migration of credit * Management of credit risk * Identification of thrust Areas Credit Risk Scoring and Rating Models: To comply with the RBI guidelines on scoring/rating systems, most of the banks have developed models to classify their large/medium sized industrial borrowers under various risk categories. Though the parameters used by the banks have a

Frm Syllabus Essay

1406 words - 6 pages ), Loss Given Default (LGD) and Recovery Rate. 7. Credit Scoring 8. Credit Spreads 9. Expected and Unexpected loss 10. Contingent claim approach and the KMV Model 11. Default and default-time correlations 12. Portfolio credit risk 13. Credit risk management models 14. Risk mitigation techniques (including netting agreement, rating triggers and collateral) Operational and Integrated Risk Management 1. 2. 3. 4. 5. 6. Definition of risk capital