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Determinants of Mortgage Loan Approval in Banks in a Developing Country: Evidence From Nigeria

Author

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  • Babalola Abdurrauf

    (1 Al-Hikmah University, Ilorin, Nigeria)

  • Ajagbe Suraj

    (2 Al-Hikmah University, Ilorin, Nigeria)

Abstract

Green This article is aimed at investigating the determinants of mortgage loan approval in developing countries, employing the binary probit model. Loan approval was made the response variable while deposit, amount to borrow, lending rate, gratuity, capacity to pay the loan and character of the borrowers stood as the explanatory variables. Cross-sectional data were collected from the four top banks in Nigeria. The result showed that all the variables had the correct signs but only the capacity to pay the loan has a significant impact in determining the success of mortgage loan approval. Collectively, all the variables have significant power to determine mortgage loan approval. It is therefore suggested that prospective borrowers should ensure that they have all it takes to refund the loan they wish to obtain from commercial banks.

Suggested Citation

  • Babalola Abdurrauf & Ajagbe Suraj, 2024. "Determinants of Mortgage Loan Approval in Banks in a Developing Country: Evidence From Nigeria," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 34(1), pages 56-73, March.
    • Handle: RePEc:vrs:suvges:v:34:y:2024:i:1:p:56-73:n:1
    DOI: 10.2478/sues-2024-0003
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    References listed on IDEAS

    as
    1. Andrew O Agbada & Ekakitie-Emonena Sunny, 2016. "Empirical Analysis of Primary Mortgage Institutions Fundamentals and Gross Domestic Product Increase in Nigeria," Applied Finance and Accounting, Redfame publishing, vol. 2(1), pages 89-100, February.
    2. Adeola Y. Oyebowale, 2020. "Determinants of Bank Lending in Nigeria," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 12(3), pages 378-398, September.
    3. Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-139, May.
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    More about this item

    Keywords

    Bank loan; Loan approval; Logit model; Probit model;
    All these keywords.

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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