Search results

1 – 10 of over 5000
To view the access options for this content please click here
Article
Publication date: 21 September 2021

Chengcheng Liao, Peiyuan Du, Yutao Yang and Ziyao Huang

Although phone calls are widely used by debt collection services to persuade delinquent customers to repay, few financial services studies have analyzed the unstructured…

Abstract

Purpose

Although phone calls are widely used by debt collection services to persuade delinquent customers to repay, few financial services studies have analyzed the unstructured voice and text data to investigate how debt collection call strategies drive customers to repay. Moreover, extant research opens the “black box” mainly through psychological theories without hard behavioral data of customers. The purpose of our study is to address this research gap.

Design/methodology/approach

The authors randomly sampled 3,204 debt collection calls from a large consumer finance company in East Asia. To rule out alternative explanations for the findings, such as consumers' previous experience of being persuaded by debt collectors or repeated calls, the authors selected calls made to delinquent customers who had not been delinquent before and were being called by the company for the first time. The authors transformed the unstructured voice and textual data into structured data through automatic speech recognition (ASR), voice mining, natural language processing (NLP) and machine learning analyses.

Findings

The findings revealed that (1) both moral appeal (carrot) and social warning (stick) strategies decrease repayment time because they arouse mainly happy emotion and fear emotion, respectively; (2) the legal warning (stick) strategy backfires because of decreasing the happy emotion and triggering the anger emotion, which impedes customers' compliance; and (3) in contrast to traditional wisdom, the combination of carrot and stick fails to decrease the repayment time.

Originality/value

The findings provide a valuable and systematic understanding of the effect of carrot strategies, stick strategies and the combinations of them on repayment time. This study is among the first to empirically analyze the effectiveness of carrot strategies, stick strategies and their joint strategies on repayment time through unstructured vocal and textual data analysis. What's more, the previous studies open the “black box” through psychological mechanism. The authors firstly elucidate a behavioral mechanism for why consumers behave differently under varying debt collection strategies by utilizing ASR, NLP and vocal emotion analyses.

Details

Journal of Service Theory and Practice, vol. 31 no. 6
Type: Research Article
ISSN: 2055-6225

Keywords

To view the access options for this content please click here
Article
Publication date: 20 August 2021

Fazelina Sahul Hamid and Yiing Jia Loke

This study analyzes the role of information disclosure in influencing credit card repayments by focusing on three intervention methods for improving repayment decisions…

Abstract

Purpose

This study analyzes the role of information disclosure in influencing credit card repayments by focusing on three intervention methods for improving repayment decisions among credit cardholders.

Design/methodology/approach

This study uses the survey method to collect data. Four questionnaires are designed to identify which types of disclosure elicit better repayment decisions among credit cardholders. The participants were approached using the mall intercept method, and a total of 1,775 responses were obtained.

Findings

Estimations using means comparison tests show that not providing minimum payment information improves repayments. The expected benefits are not delivered by the provision of higher minimum payment information or additional information that highlights the negative effects of making the minimum repayment only. Further analysis using logit estimation reconfirms the benefit of not providing minimum payment information. However, when such information is given, low minimum payment information elicits better repayment decisions than high minimum payment information or additional information. Repayment worsens under the additional information condition compared to the high minimum payment condition.

Research limitations/implications

The findings of this study have a bearing on the decisions of policy makers, credit card issuers and consumers.

Originality/value

This paper clarifies the role of information in improving debt repayment decisions.

Details

International Journal of Bank Marketing, vol. 39 no. 7
Type: Research Article
ISSN: 0265-2323

Keywords

To view the access options for this content please click here
Book part
Publication date: 2 December 2013

Angelina Nikitenko Christie

To provide a selective review of most recent developments in experimental economics of banking and lending and to summarize and synthesize the experiment designs and…

Abstract

Purpose

To provide a selective review of most recent developments in experimental economics of banking and lending and to summarize and synthesize the experiment designs and results in banking under asymmetric information.

Methodology

The review includes recently published or working papers (2006–2013) that exclusively employ experimental economics methodology, especially for studying the impact of formal or informal institutions on lending in credit markets.

Findings

The results of the reviewed experimental studies provide support for the important role of both informal (e.g., relationship banking and reputation) and formal (e.g., third-party enforcement; collateral) institutions and their impact on credit market performance, as well as the importance of studying the interaction of the two types of institutions.

Research limitations/implications

The number of studies reviewed is fairly small but growing, indicating that this is the area of growing significance.

Practical implications

Controlled economic experiments are better able to address the questions regarding the direction of causality in empirical relationships. Economic experiments are particularly useful in studying complex markets like credit and capital and in eliciting specific effects of institutions on credit market performance. Such well-established empirical relationships will be able to provide guidance for policy making for financial market reform.

Originality/value

This is the first review of laboratory research in banking and lending under asymmetric information that aims to call attention to this area of research and serves as a starting point for an interested researcher and provide future direction.

Details

Experiments in Financial Economics
Type: Book
ISBN: 978-1-78350-141-0

Keywords

To view the access options for this content please click here
Book part
Publication date: 16 September 2014

Kristiano Raccanello

The research aimed at explaining women microcredit repayment delay when loans are not granted on any joint liability group nor any other scheme based on social capital or…

Abstract

Purpose

The research aimed at explaining women microcredit repayment delay when loans are not granted on any joint liability group nor any other scheme based on social capital or financial collateral.

Design/methodology/approach

Previous research showed that greater female autonomy is associated with bearing fewer children and the former could be correlated to a higher loan repayment rate because of social and financial benefits for the household. Female autonomy proxied through the number of children and its square is regressed on the number of weeks of repayment delay in an OLS model as well as in a multilogit model that identifies borrowers according to their credit status (regular, delayed, and delinquent).

Findings

We found that more autonomous women, those bearing less than four children, repay credit more promptly and are less likely to switch into the delinquent credit status.

Research limitations/implications

Economic variables need to be complemented with some specific characteristics of the borrower, as they have a role in explaining women’s repayment delay.

Originality/value

The research provides an alternate explanation about why women repay loans when a microcredit institution does not rely on a lending methodology based on joint liability groups.

Details

Production, Consumption, Business and the Economy: Structural Ideals and Moral Realities
Type: Book
ISBN: 978-1-78441-055-1

Keywords

To view the access options for this content please click here
Article
Publication date: 4 November 2011

Shafinar Ismail, Antoaneta Serguieva and Satwinder Singh

The purpose of this paper is to measure the antecedents of students' attitude and the impact of students' attitude on the intention to repay study loans.

Downloads
2120

Abstract

Purpose

The purpose of this paper is to measure the antecedents of students' attitude and the impact of students' attitude on the intention to repay study loans.

Design/methodology/approach

Primary data from 428 students in universities in Malaysia are collected and six constructs from theory are identified: perceptions that loan repayment will affect the quality of life after graduation; awareness of loan repayment issues created by media; perceptions towards loan agreement; parental influence; students' attitude towards loan repayment; and intention to repay loan. Structural equation modelling approach is adopted to analyze the data.

Findings

Constructs of parental influence and perceptions that loan repayment will affect the quality of life after graduation are found to have a direct relationship with students' attitude towards loan repayment; perceptions towards loan agreement is found to influence belief that loan repayment will affect the quality of life after graduation; and awareness of loan repayment issues created by media is found to affect parental influence. The relationship between students' attitude and intention is found to be statistically positive and significant.

Research limitations/implications

The study has been conducted in aggregate form. Future studies could account for ethnic, gender, and regional differences.

Practical implications

The primary users of the results of this study would be the countries that provide education loans, and keen to cut down on student loan defaults.

Originality/value

The study is first of its kind to approach the issue of student loan defaults in a multi‐method manner and develop a comprehensive theoretical model that can be put to empirical test by future researchers.

Details

Journal of International Education in Business, vol. 4 no. 2
Type: Research Article
ISSN: 2046-469X

Keywords

To view the access options for this content please click here
Article
Publication date: 16 November 2012

Sandie McHugh and Rob Ranyard

Information concerning the long‐term consequences of credit repayment decisions is often not available for flexible credit facilities such as credit cards. The purpose of…

Downloads
1286

Abstract

Purpose

Information concerning the long‐term consequences of credit repayment decisions is often not available for flexible credit facilities such as credit cards. The purpose of this paper is to investigate the role of such information in repayment decisions. A dual mental accounting model of money management predicted that repayments would be influenced by both total cost and loan duration information. Experiment 2 also investigated the role of key economic and psychological factors, including some related to a risk defusing operator model of risk management.

Design/methodology/approach

In two questionnaire‐based experiments bank customers (n=241; 300) were presented with credit card and remortgage repayment scenarios. In both studies, total cost and loan duration information were varied in a 2×2 randomised‐groups factorial design.

Findings

In both studies, analysis of covariance showed that information on the long‐term consequences of repayment decisions lead to significantly higher levels of repayment. However, in Experiment 2, it was found using hierarchical multiple regression that disposable income, level of education, and the perception of, and worry about, repayment difficulties had larger significant effects on repayment levels.

Research limitations/implications

The effects of long‐term consequence information were interpreted in terms of mental accounting and future‐oriented thinking. The effect of concern with future repayment difficulties suggests that borrowers choose lower repayments to control such risks.

Practical implications

Providing total cost and loan duration information for a range of repayment levels could help borrowers make better repayment decisions.

Originality/value

These novel findings contribute to our understanding of borrowers’ repayment behaviour.

Details

Review of Behavioural Finance, vol. 4 no. 2
Type: Research Article
ISSN: 1940-5979

Keywords

To view the access options for this content please click here
Article
Publication date: 4 September 2017

Goodluck Charles and Neema Mori

The purpose of this article is to examine the effects that dynamic incentives and the borrowing histories of clients of informal lending institutions have on loan repayment

Abstract

Purpose

The purpose of this article is to examine the effects that dynamic incentives and the borrowing histories of clients of informal lending institutions have on loan repayment performance, in particular, the extent to which multiple borrowing and progressive lending affect the repayment of loans.

Design/methodology/approach

The paper uses a data set of 835 borrowers drawn from an informal lending institution in Tanzania. Descriptive analysis and econometric models are used to test the developed hypotheses.

Findings

Whereas clients with multiple loans are associated with poor loan repayment, progressive lending contributes to positive repayment outcomes. Multiple borrowers face increased debt levels and thereby an increased inability to meet their repayment obligations; in contrast, progressive lending by building up a lender–client relationship helps clients to obtain higher loans with a minimum amount of screening.

Research limitations/implications

This was a cross-sectional study based on a sample of individual clients drawn from a single institution. However, since the majority of clients had also taken out loans with other financial institutions, the sample is considered to be representative.

Practical implications

A client’s past repayment performance and multiple loan history must be assessed so that multiple borrowing can be prevented and credit absorption capacity can be gauged more accurately. The repeated nature of the interactions and the threat to cut off any future lending (if loans are not repaid) can be exploited to overcome any information deficit.

Originality/value

This study was conducted in a context in which the degree of information sharing was low and institutional access to clients’ credit histories was limited. It contributes knowledge on how lenders minimise the risk flowing from the ex ante information gap and moral hazards arising from the ex post information gap.

Details

International Journal of Development Issues, vol. 16 no. 3
Type: Research Article
ISSN: 1446-8956

Keywords

To view the access options for this content please click here
Article
Publication date: 10 April 2009

Malimba Musafiri Papias and P. Ganesan

Like other developing countries, Rwandan rural credit market is repressed, shallow, segmented, inefficient and dual structured where both formal and informal financial…

Downloads
3594

Abstract

Purpose

Like other developing countries, Rwandan rural credit market is repressed, shallow, segmented, inefficient and dual structured where both formal and informal financial systems operate side by side. While the later has been playing a predominant role, cooperative societies have emerged as an apt method of increasing the delivery of formal rural credit and savings facilities on sustainable and non‐exploitative terms albeit of financial imprudence stemming from poor credit repayment records. Thus, the purpose of this paper is to examine the factors contributing to credit repayment behaviour among the members of savings and credit cooperative societies in rural Rwanda.

Design/methodology/approach

Both exploratory and descriptive designs are used for primary data collection on variables contributing to the repayment behaviour in savings and cooperative societies. Thereafter, a binary logistic regression empirical model is employed to estimate the contribution of each variable to credit repayment rate.

Findings

The results from the tested empirical model show that age, gender and size of the household, purpose for credit, interest rate charges and number of official visits to the credit societies, have a strong effect on loan repayment performance (statistically significant at p<0.05) whereas size of credit disbursed, credit processing and disbursing time, borrowers' market place and income transfer from relatives and friends are more or less statistically significant at p<0.20 level. The remaining factors have logical and explainable sings but are not statistically significant.

Research limitations/implications

The primary limitation of this study is the scope and size of its sample as well as absence of income factor as one of important variable influencing repayment behaviour. These limitations may have an effect on the lending policy of the cooperative banks.

Originality/value

An understanding of the socio‐economic factors affecting repayment behaviour of rural clients is essential for the outreach and sustainability of the mushrooming cooperative societies in the country. Hence, this paper contributes to the empirical literature on the provision of rural financial services in African countries south of Sahara and Rwanda in particular.

Details

International Journal of Social Economics, vol. 36 no. 5
Type: Research Article
ISSN: 0306-8293

Keywords

To view the access options for this content please click here
Article
Publication date: 13 April 2015

Gemunu Nanayakkara and Jenny Stewart

The repayment performance of microfinancing loans funded by donors amounting to hundreds of millions of dollars is an important issue, because it indicates the…

Downloads
1271

Abstract

Purpose

The repayment performance of microfinancing loans funded by donors amounting to hundreds of millions of dollars is an important issue, because it indicates the effectiveness of utilising these funds to alleviate poverty. The purpose of this paper is to develop models to predict the repayment success of microfinancing loans.

Design/methodology/approach

Analysing data relating to 1,109 random loan records from Indonesia and Sri Lanka, the study develops models to predict the repayment probability of microfinancing loans using logistic regression.

Findings

There are significant differences between the two countries. In Sri Lanka, the time to approve and disburse the loan, loan cycle, gender and age of the borrower, whether a group or individual borrower, the purpose for which the loan is used and visiting frequency by the loan officers were found to be significant when predicting the repayment. Only three factors were significant in Indonesia: time to approve and disburse the loan, interest repayment frequency and gender. Both models have over 70 per cent prediction accuracy.

Originality/value

The models developed can be used in the loan appraisal stage to improve the repayment performance of microfinancing institutions saving hundreds of millions of dollars in bad debt write offs.

Details

International Journal of Social Economics, vol. 42 no. 4
Type: Research Article
ISSN: 0306-8293

Keywords

To view the access options for this content please click here
Article
Publication date: 30 August 2013

Zhang Qinlan and Yoichi Izumida

The purpose of this paper aims to explore how borrower and group‐level characteristics affect repayment decisions of group borrowers by highlighting the case of rural…

Downloads
882

Abstract

Purpose

The purpose of this paper aims to explore how borrower and group‐level characteristics affect repayment decisions of group borrowers by highlighting the case of rural credit cooperatives (RCCs) in Guizhou province in Southwest China.

Design/methodology/approach

The Logit model was applied to test the determinants of repayment performance of RCCs' group lending. The authors used the survey data of 245 farm households in Guizhou province, collected in 2008.

Findings

The empirical results indicate that there is a serious mismatch between joint liability mechanisms and the social and economic conditions in rural China. Mechanisms such as threatening to withhold defaulters' future loans from RCCs failed to work. In addition, higher household incomes also did not improve repayment performance. However, factors such as a higher degree of acquaintanceship in a group, migrant income, and employment in government agencies, positively improved the chances of repayment.

Practical implications

Group lending is more suitable for poorer areas with few opportunities for migration and limited access to finance. In addition, constructing the trustworthy relationship between micro‐lenders and customers and designing diverse and flexible financial services to meet heterogeneous demands are equally important.

Originality/value

This paper is an attempt to empirically explore the determinants of repayment performance in group lending programs in China. The results provide meaningful policy implications for the government and rural financial institutions.

Details

China Agricultural Economic Review, vol. 5 no. 3
Type: Research Article
ISSN: 1756-137X

Keywords

1 – 10 of over 5000