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What Triggers Loan Repayment Failure of Consumer Loans – Evidence from Bosnia and Herzegovina

Author

Listed:
  • Sanela Pasic

    (Sarajevo School of Science and Technology, Bosnia and Herzegovina)

  • Adisa Omerbegovic Arapovic

    (Sarajevo School of Science and Technology, Bosnia and Herzegovina)

Abstract

This research explores most dominant lending product to population of Bosnia and Herzegovina, a consumer loan, with aim to answer the question of what factors trigger loan repayment failure. It explores relation of borrower characteristics such as gender, age, level of indebtness to likeliness of loan repayment by use of probit on banking data sample representing 39% of the market share in the country. It identifies factors which lead to loan repayment failure and also provides exact empirical model for default prediction at loan approval stage. Main audience of this research should be banks, which could use the finding of the study to adjust their credit policies and risk appetite to ensure that lending losses from this strongly present product are minimized, thus leading to stable and financially sound banking sector.

Suggested Citation

  • Sanela Pasic & Adisa Omerbegovic Arapovic, 2016. "What Triggers Loan Repayment Failure of Consumer Loans – Evidence from Bosnia and Herzegovina," Eurasian Journal of Business and Management, Eurasian Publications, vol. 4(1), pages 11-22.
    • Handle: RePEc:ejn:ejbmjr:v:4:y:2016:i:1:p:11-22
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    References listed on IDEAS

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