An analysis of the credit scoring tool implemented by South African banks for vehicle asset financing
- Authors: Ntsingila, Themba
- Date: 2024-12
- Subjects: Credit scoring systems , Consumer credit , Credit -- Management
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/69972 , vital:78254
- Description: South Africa has been experiencing an increase in the number of people buying motor vehicles for primary reason of travelling from home to work and vice versa over the past years. However, there has been also an increase in the number of bad debts written off (bank repossessions) for vehicle asset financed through by the financial institutions. The risk that borrowers are not fulfilling their obligations present a huge risk to the bank as borrowing has become the leading function of the bank. This is proven by the volumes of different loans granted by banks to individuals (Kihuro and Iraya, 2018). Hartungi (2007:397) alludes that low-income earners tend to buy expensive motor vehicle which they cannot afford. It has been noted that the increased level of consumer’s indebtedness is due to unstable economy, frequent increase of petrol prices and interest rates increases. Vehicle financing face a higher probability of customers defaulting. The trend in the increase of the household credit granting became a concern for the South African government which led to the execution of the National credit act (NCA) on 1 June 2007 in a move to regulate the act particularly to protect the household in acquiring unnecessary credit. Companies are required to explore different ways of assisting their customers by reducing the high number of debts written off for motor vehicles. This study used the quantitative approach using the survey method to collect data from respondents who are credit managers in a bank based in Gauteng province. Data collection took place in a bank using a questionpro survey distributed by email to junior credit managers, credit managers and senior credit managers to administer an open-ended questionnaire. Responses received were codified and quantitative data was analysed using Statistical tools and packages including Statistica. This research aims to assist the financial institution(s) by performing better assessment in granting of credit for asset finance and by reducing several bad debts. It is the main aim of this academic exercise to bring to the fore the scholastic analysis to further enlighten the reader about the burden of reckless lending not only to individuals who are granted credit but also the approved financial institutions themselves. The study found variable respondents’ opinion of the analysis of the credit scoring tool used. In conclusion, is perceived that the use of correct credit scoring tool will reduce the number of bad debts written off. It can be recommended that a National Credit Act intervention could be applied to mitigate the risk of defaulting in credit assessment for loans granted to consumers. Therefore, the study seeks to first look at the credit scoring tool as a viable and relevant tool used for Vehicle Asset Financing (VAF) in the banking sector, and secondly attempt to provide novel ways to improve and enhance the current system with the sole aim to align with National Credit Regulator (NCR). , Thesis (MBA) -- Faculty of Business and Economic Sciences, Business School, 2024
- Full Text:
- Date Issued: 2024-12
- Authors: Ntsingila, Themba
- Date: 2024-12
- Subjects: Credit scoring systems , Consumer credit , Credit -- Management
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/69972 , vital:78254
- Description: South Africa has been experiencing an increase in the number of people buying motor vehicles for primary reason of travelling from home to work and vice versa over the past years. However, there has been also an increase in the number of bad debts written off (bank repossessions) for vehicle asset financed through by the financial institutions. The risk that borrowers are not fulfilling their obligations present a huge risk to the bank as borrowing has become the leading function of the bank. This is proven by the volumes of different loans granted by banks to individuals (Kihuro and Iraya, 2018). Hartungi (2007:397) alludes that low-income earners tend to buy expensive motor vehicle which they cannot afford. It has been noted that the increased level of consumer’s indebtedness is due to unstable economy, frequent increase of petrol prices and interest rates increases. Vehicle financing face a higher probability of customers defaulting. The trend in the increase of the household credit granting became a concern for the South African government which led to the execution of the National credit act (NCA) on 1 June 2007 in a move to regulate the act particularly to protect the household in acquiring unnecessary credit. Companies are required to explore different ways of assisting their customers by reducing the high number of debts written off for motor vehicles. This study used the quantitative approach using the survey method to collect data from respondents who are credit managers in a bank based in Gauteng province. Data collection took place in a bank using a questionpro survey distributed by email to junior credit managers, credit managers and senior credit managers to administer an open-ended questionnaire. Responses received were codified and quantitative data was analysed using Statistical tools and packages including Statistica. This research aims to assist the financial institution(s) by performing better assessment in granting of credit for asset finance and by reducing several bad debts. It is the main aim of this academic exercise to bring to the fore the scholastic analysis to further enlighten the reader about the burden of reckless lending not only to individuals who are granted credit but also the approved financial institutions themselves. The study found variable respondents’ opinion of the analysis of the credit scoring tool used. In conclusion, is perceived that the use of correct credit scoring tool will reduce the number of bad debts written off. It can be recommended that a National Credit Act intervention could be applied to mitigate the risk of defaulting in credit assessment for loans granted to consumers. Therefore, the study seeks to first look at the credit scoring tool as a viable and relevant tool used for Vehicle Asset Financing (VAF) in the banking sector, and secondly attempt to provide novel ways to improve and enhance the current system with the sole aim to align with National Credit Regulator (NCR). , Thesis (MBA) -- Faculty of Business and Economic Sciences, Business School, 2024
- Full Text:
- Date Issued: 2024-12
Strategies for loan default reduction and management among SMMEs: the Old Mutual Masisizane Fund case study
- Authors: Ngcai, Sipho
- Date: 2018
- Subjects: Credit -- Management , Loans -- South Africa Small business -- Finance Small business -- Management New business enterprises -- Management Microfinance -- South Africa
- Language: English
- Type: Thesis , Masters , MBA
- Identifier: http://hdl.handle.net/10948/33693 , vital:32968
- Description: The primary research objective of this study was to determine strategies for reducing loan defaulting and bad debts among the MF loan clients. The study was premised on the crucial significance of SMMEs in social and economic development. The study focused on MF with the aim of deciphering the factors that constrain loan recipients from servicing their loans leading to defaulting and bad debt. The research endeavors to contribute towards improving the ability of DFIs in general to recover loans while building the capacity of small businesses to become sustainable. The study adopted a qualitative approach and targeted eight (8) MF staff members responsible for loan administration and 15 MF loan recipients. In-depth interviews were conducted with the respondents. The interviews were transcribed and the data analysed through content analysis. The findings were aggregated in pre-determined themes as well as around emerging themes and sub-themes. The findings indicate that most MF loan recipients are identified through referrals from current and past clients, and other stakeholders; MF has a comprehensive and systematic loan application process; and MF provides support services to loan recipients. The findings also indicate that loan recipients default on payments because they lack financial management skills; sudden or sustained changes in the market; natural disasters, especially drought; and generally poor business management acumen. Other reasons for loan defaulting were caused by delays in funds disbursement by MF, ineffective monitoring mechanisms and approval of business enterprises that are not viable. The following recommendations were made: streamline the loan application process to increase effectiveness and efficiency; introduce an online loan application portal to complement and upgrade the current application process; deploy sector specialists when performing due diligence; provide business loans and grants in parallel in order to grow SMMEs while satisfying developmental needs; extend client site visits to include group meetings to facilitate peer learning and skills transfer; create a suite of capacity building and training support services for loan recipients; and develop a community of practice for DFIs to facilitate networking and information sharing.
- Full Text:
- Date Issued: 2018
- Authors: Ngcai, Sipho
- Date: 2018
- Subjects: Credit -- Management , Loans -- South Africa Small business -- Finance Small business -- Management New business enterprises -- Management Microfinance -- South Africa
- Language: English
- Type: Thesis , Masters , MBA
- Identifier: http://hdl.handle.net/10948/33693 , vital:32968
- Description: The primary research objective of this study was to determine strategies for reducing loan defaulting and bad debts among the MF loan clients. The study was premised on the crucial significance of SMMEs in social and economic development. The study focused on MF with the aim of deciphering the factors that constrain loan recipients from servicing their loans leading to defaulting and bad debt. The research endeavors to contribute towards improving the ability of DFIs in general to recover loans while building the capacity of small businesses to become sustainable. The study adopted a qualitative approach and targeted eight (8) MF staff members responsible for loan administration and 15 MF loan recipients. In-depth interviews were conducted with the respondents. The interviews were transcribed and the data analysed through content analysis. The findings were aggregated in pre-determined themes as well as around emerging themes and sub-themes. The findings indicate that most MF loan recipients are identified through referrals from current and past clients, and other stakeholders; MF has a comprehensive and systematic loan application process; and MF provides support services to loan recipients. The findings also indicate that loan recipients default on payments because they lack financial management skills; sudden or sustained changes in the market; natural disasters, especially drought; and generally poor business management acumen. Other reasons for loan defaulting were caused by delays in funds disbursement by MF, ineffective monitoring mechanisms and approval of business enterprises that are not viable. The following recommendations were made: streamline the loan application process to increase effectiveness and efficiency; introduce an online loan application portal to complement and upgrade the current application process; deploy sector specialists when performing due diligence; provide business loans and grants in parallel in order to grow SMMEs while satisfying developmental needs; extend client site visits to include group meetings to facilitate peer learning and skills transfer; create a suite of capacity building and training support services for loan recipients; and develop a community of practice for DFIs to facilitate networking and information sharing.
- Full Text:
- Date Issued: 2018
The credit risk management skills shortage in Nelson Mandela Bay Metropole
- Authors: Teka, Babalwa
- Date: 2012
- Subjects: Banks and banking -- Risk management -- South Africa -- Nelson Mandela Bay Municipality , Credit -- Management , Risk management
- Language: English
- Type: Thesis , Masters , MBA
- Identifier: vital:8834 , http://hdl.handle.net/10948/d1019893
- Description: Tito Mboweni (2011) said one of South Africa’s biggest tests is the overwhelming the skills shortage. He was echoing the views of Higher Education Minister Blade Nzimande who himself said “South Africa could not afford to have an economy "constrained by a severe lack of skills". There are numerous initiatives that having been undertaken by government in an attempt to solve the skills shortage problem. However, these initiatives are not aimed at the tertiary education system. The tertiary education system is the focus of this study as the author investigates how the NMMU Business School can play a significant role in addressing the skills shortage in the credit risk management sector. Following a literature review, surveys were completed by the NMMU Business School MBA students (ninety of them completed it) and personal interviews were conducted with three Provincial HR managers from South Africa’s “four big banks” in Nelson Mandela Bay (Nedbank, Standard Bank and ABSA). The study found that the skills shortage is indeed a problem. The study found that reasons including the legacy left by apartheid and students pursuing the wrong degrees were highlighted as some of the reason for this skills shortage. An opportunity for the NMMU Business School was identified to support the banking industry in addressing credit risk management skills shortage. The benefits include financial reward and more importantly an opportunity to differentiate the Business School and the courses offered at the school from the rest. Some of the recommendations included sourcing of the best practices from institutions like the Millpark Business School on effective partnering with the banking industry as well as a proactive approach to be adopted by the banking industry in terms of lobbying support from other potential role players for example but not limited to, student bodies, BankSeta and the smaller banks in the industry.
- Full Text:
- Date Issued: 2012
- Authors: Teka, Babalwa
- Date: 2012
- Subjects: Banks and banking -- Risk management -- South Africa -- Nelson Mandela Bay Municipality , Credit -- Management , Risk management
- Language: English
- Type: Thesis , Masters , MBA
- Identifier: vital:8834 , http://hdl.handle.net/10948/d1019893
- Description: Tito Mboweni (2011) said one of South Africa’s biggest tests is the overwhelming the skills shortage. He was echoing the views of Higher Education Minister Blade Nzimande who himself said “South Africa could not afford to have an economy "constrained by a severe lack of skills". There are numerous initiatives that having been undertaken by government in an attempt to solve the skills shortage problem. However, these initiatives are not aimed at the tertiary education system. The tertiary education system is the focus of this study as the author investigates how the NMMU Business School can play a significant role in addressing the skills shortage in the credit risk management sector. Following a literature review, surveys were completed by the NMMU Business School MBA students (ninety of them completed it) and personal interviews were conducted with three Provincial HR managers from South Africa’s “four big banks” in Nelson Mandela Bay (Nedbank, Standard Bank and ABSA). The study found that the skills shortage is indeed a problem. The study found that reasons including the legacy left by apartheid and students pursuing the wrong degrees were highlighted as some of the reason for this skills shortage. An opportunity for the NMMU Business School was identified to support the banking industry in addressing credit risk management skills shortage. The benefits include financial reward and more importantly an opportunity to differentiate the Business School and the courses offered at the school from the rest. Some of the recommendations included sourcing of the best practices from institutions like the Millpark Business School on effective partnering with the banking industry as well as a proactive approach to be adopted by the banking industry in terms of lobbying support from other potential role players for example but not limited to, student bodies, BankSeta and the smaller banks in the industry.
- Full Text:
- Date Issued: 2012
A risk mitigation tool for merchant selection
- Schutte, Philippus Jacobus Wilhelmus
- Authors: Schutte, Philippus Jacobus Wilhelmus
- Date: 2010
- Subjects: Financial rsik management -- South Africa , Credit -- Management
- Language: English
- Type: Thesis , Masters , MBA
- Identifier: vital:8650 , http://hdl.handle.net/10948/1382 , Financial rsik management -- South Africa , Credit -- Management
- Description: Organisations or individuals that lend money (banks and micro lenders) or that sell goods on credit (retailers) are classified as credit providers. The debtor enters into a contractual agreement with a credit provider, or creditor, with the obligation to repay the loan amount, fees and interest according to a predetermined schedule. The contractual agreement, also known as a credit agreement, is as a general rule very complex. Legislation protecting debtors in various ways is an international phenomenon. In South Africa, the National Credit Act, Act 34 of 2005 (NCA) was enacted in 2005. The NCA changed the playing field for credit providers participating in the South African consumer credit market to a great extent. Consumer lending is the sleeping giant of the financial sector. The key to successfully unlock this enormous market is the credit provider's ability to accurately assess the creditworthiness of a potential customer during the customer acquisition phase. The creditworthiness of the customer is related to the risk of default, i.e. a debtor's non-payment of debt in terms of the credit agreement. The risk of default is also known as credit risk. Real People Investment Holdings (Pty) Ltd (RPIH) classifies credit risk as the single largest risk the Group is exposed to. They recognise that the intelligent and responsible management of credit risk makes it the Group's largest profit driver. Credit risk scorecards are excellent decision aids during the customer acquisition phase. The characteristics and behaviour of merchants submitting credit applications to RPIH for assessment have a definite impact on the credit risk of the Group. The merchant plays a pivotal role in the debtor-creditor-supplier business model. The merchant influences the customer's sales experience and subsequent level of satisfaction with the transaction. A satisfied customer constitutes a lower level of credit risk for the creditor, in this case RPIH. The research is conducted with a positivistic paradigm. The cross-sectional study approach is used. The merchant is the unit of analysis. A sample of 77 merchants is selected from the population of 244 merchants who submitted credit applications to RPIH during the observation period. Questionnaires are used as the data collection method in this research project. The predictive ability of fourteen merchant related characteristics are demonstrated through this empirical study.
- Full Text:
- Date Issued: 2010
- Authors: Schutte, Philippus Jacobus Wilhelmus
- Date: 2010
- Subjects: Financial rsik management -- South Africa , Credit -- Management
- Language: English
- Type: Thesis , Masters , MBA
- Identifier: vital:8650 , http://hdl.handle.net/10948/1382 , Financial rsik management -- South Africa , Credit -- Management
- Description: Organisations or individuals that lend money (banks and micro lenders) or that sell goods on credit (retailers) are classified as credit providers. The debtor enters into a contractual agreement with a credit provider, or creditor, with the obligation to repay the loan amount, fees and interest according to a predetermined schedule. The contractual agreement, also known as a credit agreement, is as a general rule very complex. Legislation protecting debtors in various ways is an international phenomenon. In South Africa, the National Credit Act, Act 34 of 2005 (NCA) was enacted in 2005. The NCA changed the playing field for credit providers participating in the South African consumer credit market to a great extent. Consumer lending is the sleeping giant of the financial sector. The key to successfully unlock this enormous market is the credit provider's ability to accurately assess the creditworthiness of a potential customer during the customer acquisition phase. The creditworthiness of the customer is related to the risk of default, i.e. a debtor's non-payment of debt in terms of the credit agreement. The risk of default is also known as credit risk. Real People Investment Holdings (Pty) Ltd (RPIH) classifies credit risk as the single largest risk the Group is exposed to. They recognise that the intelligent and responsible management of credit risk makes it the Group's largest profit driver. Credit risk scorecards are excellent decision aids during the customer acquisition phase. The characteristics and behaviour of merchants submitting credit applications to RPIH for assessment have a definite impact on the credit risk of the Group. The merchant plays a pivotal role in the debtor-creditor-supplier business model. The merchant influences the customer's sales experience and subsequent level of satisfaction with the transaction. A satisfied customer constitutes a lower level of credit risk for the creditor, in this case RPIH. The research is conducted with a positivistic paradigm. The cross-sectional study approach is used. The merchant is the unit of analysis. A sample of 77 merchants is selected from the population of 244 merchants who submitted credit applications to RPIH during the observation period. Questionnaires are used as the data collection method in this research project. The predictive ability of fourteen merchant related characteristics are demonstrated through this empirical study.
- Full Text:
- Date Issued: 2010
The Grameen Bank model of microcredit and its relevance for South Africa
- Authors: Akpan, Iniobong Wilson
- Date: 2005
- Subjects: Grameen Bank , Microfinance -- South Africa , Microfinance -- Bangladesh , Credit -- Management , Risk management , Poor -- Finance, Personal , South Africa -- Economic conditions , Bangladesh -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:980 , http://hdl.handle.net/10962/d1002714 , Grameen Bank , Microfinance -- South Africa , Microfinance -- Bangladesh , Credit -- Management , Risk management , Poor -- Finance, Personal , South Africa -- Economic conditions , Bangladesh -- Economic conditions
- Description: Among the reasons for financial exclusion is the fact that the poor, being largely illiterate and unemployed, are traditionally perceived as ‘bad credit risks’. This is the dominant perception of the poor in the formal credit markets – a perception that also exists in the microcredit sector. In other words, while information asymmetry is a recognized problem in lender-borrower relationships, lenders consider the problem particularly severe when they contemplate doing business with the poor. A contrasting paradigm, such as the one adopted by Grameen Bank of Bangladesh, views the poor as possessing economic potentials that have not been tapped – that is, as ‘good credit risks’. Grameen Bank’s microcredit features appear to have successfully mitigated the problems of information asymmetry and, to a large extent, made it possible for the poor to access microenterprise credit. Using the Grameen Bank model as a benchmark, this study examined the lending features of private sector microlenders in South Africa and those of KhulaStart (credit) scheme. The aim was to identify how the lending features affect microenterprise credit access. Primary data were obtained through interviews, while relevant secondary data were also used in the study. A key finding of the study was that while the Khulastart scheme was, like Grameencredit, targeted at the poor, the method of its delivery appeared diluted or unduly influenced by the conventional (private sector) paradigm that pre-classifies people as ‘good’ or ‘bad’ credit risks. As a result, the scheme was not robust enough to support microenterprise credit access. This has consequences for job-creation and poverty reduction. Based on the findings, the study maintains that a realistic broadening of microenterprise credit access will not occur unless there is a fundamental paradigm shift in microcredit practices, and unless measures designed to mitigate information asymmetries are sensitive to the historical, economic and sociocultural realities of the South African poor.
- Full Text:
- Date Issued: 2005
- Authors: Akpan, Iniobong Wilson
- Date: 2005
- Subjects: Grameen Bank , Microfinance -- South Africa , Microfinance -- Bangladesh , Credit -- Management , Risk management , Poor -- Finance, Personal , South Africa -- Economic conditions , Bangladesh -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:980 , http://hdl.handle.net/10962/d1002714 , Grameen Bank , Microfinance -- South Africa , Microfinance -- Bangladesh , Credit -- Management , Risk management , Poor -- Finance, Personal , South Africa -- Economic conditions , Bangladesh -- Economic conditions
- Description: Among the reasons for financial exclusion is the fact that the poor, being largely illiterate and unemployed, are traditionally perceived as ‘bad credit risks’. This is the dominant perception of the poor in the formal credit markets – a perception that also exists in the microcredit sector. In other words, while information asymmetry is a recognized problem in lender-borrower relationships, lenders consider the problem particularly severe when they contemplate doing business with the poor. A contrasting paradigm, such as the one adopted by Grameen Bank of Bangladesh, views the poor as possessing economic potentials that have not been tapped – that is, as ‘good credit risks’. Grameen Bank’s microcredit features appear to have successfully mitigated the problems of information asymmetry and, to a large extent, made it possible for the poor to access microenterprise credit. Using the Grameen Bank model as a benchmark, this study examined the lending features of private sector microlenders in South Africa and those of KhulaStart (credit) scheme. The aim was to identify how the lending features affect microenterprise credit access. Primary data were obtained through interviews, while relevant secondary data were also used in the study. A key finding of the study was that while the Khulastart scheme was, like Grameencredit, targeted at the poor, the method of its delivery appeared diluted or unduly influenced by the conventional (private sector) paradigm that pre-classifies people as ‘good’ or ‘bad’ credit risks. As a result, the scheme was not robust enough to support microenterprise credit access. This has consequences for job-creation and poverty reduction. Based on the findings, the study maintains that a realistic broadening of microenterprise credit access will not occur unless there is a fundamental paradigm shift in microcredit practices, and unless measures designed to mitigate information asymmetries are sensitive to the historical, economic and sociocultural realities of the South African poor.
- Full Text:
- Date Issued: 2005
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