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Modelling Credit Risk for Personal Loans Using Product-Limit Estimator

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  • Okumu Argan Wekesa
  • Mwalili Samuel
  • Mwita Peter

Abstract

A product- limit approach was adopted to estimate time to default for male and female loan applicants. For each group, a sample of 250 applicants was observed for a 30 months. The life of the account is measured from the month it was opened until the account becomes ¡®bad¡¯ or it is closed or until the end of observation. The account is considered bad if payment is not made for two consecutive months in line with the industry practice. If the account does not miss two payments and is closed or survives beyond the observation period, it is considered to be censored. The results showed that there is no significant difference between male and female applicants in terms of their survival times and hazard rates.

Suggested Citation

  • Okumu Argan Wekesa & Mwalili Samuel & Mwita Peter, 2012. "Modelling Credit Risk for Personal Loans Using Product-Limit Estimator," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 3(1), pages 22-32, January.
    • Handle: RePEc:jfr:ijfr11:v:3:y:2012:i:1:p:22-32
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    References listed on IDEAS

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    Cited by:

    1. Jun†Tae Han & Jae†Seok Choi & Myeon†Jung Kim & Jina Jeong, 2018. "Developing a Risk Group Predictive Model for Korean Students Falling into Bad Debt," Asian Economic Journal, East Asian Economic Association, vol. 32(1), pages 3-14, March.

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