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The Application of Discriminant Model in Managing Credit Risk for Consumer Loans in Vietnamese Commercial Bank

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  • Nguyen Duong
  • Do Thi Thu Ha
  • Nguyen Bich Ngoc

Abstract

The study focus on analysing financial status of consumer credit customers of Vietnamese commercial banks through two group discriminant function. Five independent variables were used in which some variables are related with the loan and the others are related with the demographic and socio-economic conditions of the borrower. Particularly, the variables related with the demographic and socio-economic conditions of the borrower are age; number of dependents; years at present job and salary while the independent variable related with the loan is loan amount. The result indicates that the estimated function is significant at 1 per cent level of significance and could forecast financial health with average 72.3 per cent accuracy. Therefore, in this study, the demographic, socio-economic and loan related variables can be used to determine the expected group membership of the borrowers in Vietnam.

Suggested Citation

  • Nguyen Duong & Do Thi Thu Ha & Nguyen Bich Ngoc, 2017. "The Application of Discriminant Model in Managing Credit Risk for Consumer Loans in Vietnamese Commercial Bank," Asian Social Science, Canadian Center of Science and Education, vol. 13(2), pages 176-176, February.
    • Handle: RePEc:ibn:assjnl:v:13:y:2017:i:2:p:176
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    References listed on IDEAS

    as
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    3. Awh, Robert Y & Waters, D, 1974. "A Discriminant Analysis of Economic, Demographic, and Attitudinal Characteristics of Bank Charge-Card Holders: A Case Study," Journal of Finance, American Finance Association, vol. 29(3), pages 973-980, June.
    4. Thomas, Lyn C., 2000. "A survey of credit and behavioural scoring: forecasting financial risk of lending to consumers," International Journal of Forecasting, Elsevier, vol. 16(2), pages 149-172.
    5. David Durand, 1941. "Risk Elements in Consumer Instalment Financing, Technical Edition," NBER Books, National Bureau of Economic Research, Inc, number dura41-2.
    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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