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Applying discriminant model to manage credit risk for consumer loans in Vietnamese commercial bank

Author

Listed:
  • NGUYEN THUY DUONG

    (Banking Academy of Vietnam)

  • DO THI THU HA

    (Banking Academy of Vietnam)

  • NGUYEN BICH NGOC

    (Banking Academy of Vietnam)

Abstract

This study estimates a two-group discriminant function to determine the expected financial health of the consumer credit customers’ of a bank of Vietnam by using five demographic, socio-economic, and loan characteristics of the sample borrowers. The estimated function is significant at one per cent level of significance and the model estimates financial health/group membership with average seventy-three per cent accuracy. Like developed countries, it is expected that use of the estimated discriminant function in the consumer credit decision making will decrease bad debts, will help to set risk based credit pricing for the clients and will make the credit granting faster and more accurate.

Suggested Citation

  • Nguyen Thuy Duong & Do Thi Thu Ha & Nguyen Bich Ngoc, 2016. "Applying discriminant model to manage credit risk for consumer loans in Vietnamese commercial bank," Review of Business and Economics Studies, CyberLeninka;Федеральное государственное образовательное бюджетное учреждение высшего профессионального образования «Финансовый университет при Правительстве Российской Федерации» (Финансовый университет), issue 4, pages 5-16.
    • Handle: RePEc:scn:031730:16946467
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