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Legacy and credit scores in South Africa

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  • C. Charles Okeahalam

Abstract

This paper assesses the impact of legacy and credit scores on access to bank credit in South Africa. Typically, credit data focuses on socio-economic information. However legacy variables, factors beyond the control of individuals, have not been well considered. We find that although credit scores clearly influence access to credit, legacy has a statistically significant impact on credit scores and on the amount of credit granted. While these results can be interpreted as bias against those with negative legacy, they can also be explained in terms of information asymmetry and the relative ability to enforce contracts with clients who have positive legacy.

Suggested Citation

  • C. Charles Okeahalam, 2012. "Legacy and credit scores in South Africa," International Review of Applied Economics, Taylor & Francis Journals, vol. 26(6), pages 829-841, May.
    • Handle: RePEc:taf:irapec:v:26:y:2012:i:6:p:829-841
    DOI: 10.1080/02692171.2012.696591
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    References listed on IDEAS

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    1. Dean Karlan & Jonathan Zinman, 2010. "Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts," The Review of Financial Studies, Society for Financial Studies, vol. 23(1), pages 433-464, January.
    2. Stephen L. Ross & John Yinger, 2002. "The Color of Credit: Mortgage Discrimination, Research Methodology, and Fair-Lending Enforcement," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182289, April.
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