Empirical Investigation of Socio-economic and Bank Specific Factors on Credit Defaults: Evidences from Pakistan

Abstract

Financial institutions are backbone of the economy. A major issue for financial institutions is to investigate the factors which are responsible for credit defaults. This study investigates the impact of various socio-economic and bank specific factors along with inflation rate on loan repayment. Secondary data is used in the study. A Cross-sectional sample of 350 borrowers, which took personal loan from different commercial banks in the area of Lahore was selected. Descriptive as well as multiple regression techniques were used for analysis. The results reveal that borrowers' gender, age, marital status, educational level, occupation, and income do not affect loan repayment. However Interest rate and disbursed amount negatively affect loan repayment, whereas loan maturity period and inflation rate positively effect loan repayment.