A Research Proposal

Entitled: The Perceived Effects of Punishment

to Delinquent Debtors

in partial fulfilment for the requirements in

Credit and Collection

Presented By:
Dela Rosa, Divine Angelique
Duran, Marjorie
Jaspeo, Kim Ivy
Perez, Bethxyz

Presented to:
Karen Catacutan
Gladys Tumbali
Jermin Mabborang

February 26, 2016

INTRODUCTION:
Background of the Study:
In solving the problems dealing with delinquent payers in a business firm, the group
aims to solve the said matter through knowing the reasons for not paying promptly and
find out the best solution in dealing with them.
In a business firm, rules should be improved and strictly followed for the success of
running a business. Once it is not followed, many problems will surely be experienced
or encountered that can lead to bankruptcy. For instance, a lending company for it to
prosper there should be an effective collection or strategies to follow. One of it is to
impose punishments to delinquent payers. In this manner, the client will find means and
ways to pay the monthly payments of his loan. Once credit in loan is extended inevitably
the debtor could hardly pay the loan amount. If this case will happen always, then the
lending will not prosper likewise tendency is the debtor will either escape from his
responsibility or leads to renewal of loans. The responsibility to collect is greater than
the responsibility to pay since the interest will grow bigger and bigger. In other words,
the creditor should run after the debtor and running is a must to be able to collect. The
creditor should know how to handle delinquent payers and maintain their good
reputation to motivate debtors to continue business with them.
Indeed, an amount not being paid could not be accounted if not being collected. That is
the purpose of imposing effective collection of money. If collection fails then profitability
of the business will also suffer. In the study of Salima Y. Paul, S. Susela Devi and Chee
Ghee Tehmany entitled Impact of late payment on Firms' profitability: Empirical
evidence from Malaysia (2012), Pacific-Basin Finance they

examine whether late

payment (LP) by customers impacts firms' profitability. And it was found that 60% of the
sampled firms experience LP and LP has a significant inverse effect on their profitability;
and those with shorter credit terms and Days Sales Outstanding (DSO) perform better
than those with longer credit terms and longer DSO.
Therefore before having a final transaction to the client, through evaluation of this
background especially on financial aspect or sources of income should be considered.
Only capable and qualified client should be given attention or the chance so as not to
have problems in the collection. Because when Alex Addae-Korankye conducted a

study which is The Causes and Control of Loan Default/Delinquency in Microfinance

Institution in Ghana(2014). He found out that the causes of loan default to include; high
interest rate, inadequate loan sizes, poor appraisal, lack of monitoring and improper
client selection. It was concluded that the government and hence Bank of Ghana should
regularly monitor and supervise the MFIs so as to ensure safety of clients deposits and
customers confidence.
Discounts are not advisable because they might abuse it. Although it is but normal in a
business to have a win-win strategy. So as to avoid such delinquent payers we can ask
for collateral to motivate them in paying their obligations.
Statement of the problem and research questions
Delinquency is one of the major problems of credit institutions because it affects their
profitability. In order to collect these late payments credit institutions impose
punishments to the debtors. This study aims to identify the perceived effect of imposing
punishment in collecting the payment of delinquent debtors. It also aims to answer the
following question:
1. What are the profile of the lending institution in terms of:
I. Years of Existence
II. Type of Institution
III. Capitalization
2. What is the perceived effect of the punishments imposed in collecting the
payment of delinquent debtors?
3. Is there a significant difference in the perceived effect of imposing punishment
in collecting the payment of delinquent debtors in terms of profile variable?
Significance of the Study:
This research paper will conclude the perceived effects of imposing punishment to
delinquent payment practices of debtors. This would be useful to lending institutions for
them to be guided and to gain improvement on their collections. It will also serve as
guidance to the credit institutions in handling their delinquent debtors.

Underpinning Theory
While punishment can be effective in some cases, you can probably think of a few
examples of when punishment does not reduce a behavior. Prison is one example. After
being sent to jail for a crime, people often continue committing crimes once they are
released from prison.
Why is it that punishment seems to work in some instances, but not in others? Gershoff,
E. T. (2002) have found a number of factors that contribute to how effective punishment
is in different situations.
First, punishment is more likely to lead to a reduction in behavior if it immediately
follows the behavior. Second, punishment achieves greater results when it is
consistently applied. It can be difficult to administer a punishment every single time a
behavior occurs. Punishment also has some notable drawbacks. First, any behavior
changes that result from punishment are often temporary.
"Punished behavior is likely to reappear after the punitive consequences are
withdrawn," Skinner explained in his book About Behaviorism.
Perhaps the greatest drawback is the fact that punishment does not actually offer any
information about more appropriate or desired behaviors. While subjects might be
learning to not perform certain actions, they are not really learning anything about what
they should be doing.
The factors contributed by Gershoff, E. T. (2002), Psychological Bulletin, 128, 539-579
will be used in the research, given the importance of perception.

Literature Review
Discussion of Literature by Themes
Length of Time Creditors Collect
Most consumer debts, whether credit card debt, student loans, medical debt,
auto loans, or mortgages, are paid in their ordinary course. According to one estimate
conducted by Fair Isaac Corp., approximately 95 percent of all consumer debt is paid on
time and less than half of consumers have been reported as 30 or more days late on a

payment. Even this high level of voluntary payment depends in part on the perceived
effectiveness of the debt collection system in the event of non-payment.
Credit Price that Creditors Impose
A study published by William Dunkelberg in 1978 finds evidence that stricter
regulation of creditor remedies results in higher prices and lower levels of credit for
consumers. In 1973, the state of Wisconsin enacted the Wisconsin Consumer Act
(WCA), which, among other things, imposed substantial new limits on the remedies
available to creditors on a consumers default.
For a lender to make a loan profitably, it must be able to price the risk of loss
accurately according to Todd Zywicki (2010) on his Testimony Before the United States
House of Representatives Committee on Financial Services Committee on Small
Business. Therefore, if the risk of loss is higher, a lender will need to charge a higher
price to compensate for the heightened risk of loss. If the lender is unable to accurately
price the risk of the loan, such as because of regulatory limits, then the lender will
reduce its risk exposure either by lending to fewer borrowers (and, in particular, by
limiting credit offered to higher-risk borrowers) or by lending less to the same borrowers
by reducing credit lines and loan size. One element of the risk of loss is the ability to
collect from a debtor who defaults. If collection powers are weaker, the loss rate will be
higher, for two reasons. First, if the creditor is more limited in its ability to collect, it will
recover less from the defaulted debtor, and collection efforts will be more costly.
Second, if the consequences of default are less severe, borrowers will be more likely to
default. As a result, greater restraints on the ability of creditors to collect will tend to
increase their losses. In turn, lenders will respond to this increased risk of loss by
raising interests to compensate or by reducing risk exposure.
As an a priori matter, therefore, it is not clear whether borrowers as a whole will
be made better or worse off from stricter regulation of collections. Although they who are
already in default generally will benefit from greater restraints on collections, the benefit
will come at the expense of other consumers who may end up paying more or obtaining
less access to credit (including the borrower currently in default, who may want new

credit in the future). Joseph E. Stiglitz and Andrew Weiss (1981) said at the time of
making a loan a lender cannot perfectly predict which particular borrowers will
eventually default; all potential borrowers will be forced to pay higher costs for credit,
but especially riskier borrowers. Conversely, weakening creditor remedies will increase
the risk of loss for creditors, thereby raising the cost of lending. Such a reform will lead
to a reduced supply of lending and higher prices, everything else being equal.
Creditors General Provisions
A recent study by economist Viktar Fedaseyeu confirms the standard economic
analysis that mandatory restrictions on creditor collections have an overall adverse
effect on consumers access to credit. Fedaseyeu created a database that rates the
strictness of states collection laws and the effect on access to consumer credit in each
state. He finds that stricter regulation of third-party debt collectors results in a lower
level of credit card collections in each state (9% lower on average for each additional
restriction on debt collection activity) and that this circumstance leads to a decrease of
2.2% in the number of new revolving lines of credit for consumers.
Nadia Massuod, Anthony Saunders, Barry Scholnick (2011) and Anthony Siaw,
Evans Brako Ntiamoah, Emmanuel Oteng, Beatrice Opoku (2014) found evidence that
penalty fees are positively related to measure of bank market share. It also finds that
fees are increasing in customer risk, supports the position of defenders of penalty fees
such as banks. Fees increasing in market share are consistent with rent extraction, and
the concerns expressed by politicians and regulators.
Size of Lending Institutions
Responses from the sample firms conducted by MICHAEL J. PEEL(2000) were found
to differ significantly with respect to firm size; larger small firms had a worse late
payment problem and consequently had to do more in the way of 'back-end' credit
management (i.e. collection, analysis of late payment and debtor days). However, there
was barely any support for credit management training among this sub-group. The
smaller (micro) firms had a lesser late payment problem and subsequently did less

'back-end' credit management but were more concerned with various aspects of
institutional finance.
HYPOTHESIS:
The writers hypothesize that there is no significant difference in the perceived
effect of imposing punishment in collecting the payment of delinquent debtors in terms
of profile variable.
Research Paradigm:
Independent Variable

Dependent Variable

1. Profile
I. Years of Existence
II. Type of Institution
III. Capitalization

Perceived effects of
punishment to delinquent
debtors

The diagram shows that the independent variables which are the punishments imposed
affect the payment practices of delinquent debtors.
Methods:
A descriptive research methodology will be used by the researchers to assess the
perceptions of selected respondents regarding the perceived effect of imposing
punishment to delinquent payment practices of debtors. The respondents will be the
lending institutions basing from their observation to the behaviour of their delinquent
debtors after they imposed punishment to collect the late payments. Questionnaires will
be utilized and be floated in various credit institutions here in the Tuguegarao. Prior to
the conduct of the study, the questionnaires will subject to reliability test. The
respondents will be requested to indicate the extent to which the punishment affects the
delinquent debtors. The data was collected through a five-point Likert scale and
analyzed through use of percentages.
.

Literature Matrix
Researche Bibliography
rs

Major
Objective/
Main
Problems

Delineated
Factors/
Variables/
Themes

Beatrice
Njeru
Warue

Factors
Affecting
Loan
Delinquency
in Micro
finance Instit
utions in
Kenya
(2012),
International
Journal of
Management
Sciences
and
Business
Research,
Vol. 1, Issue
12, 2012 )

To establish
which of the
factors
significantly
affects loan
delinquency
performance
in MFIs in
Kenya.

Microfinance
institutions;
Self-help
groups
specific
factors and
external
factors:
Loan

Salima Y.
Paul,
S. Susela
Devi,
Chee
Ghee Teh

Impact of
late payment
on Firms'
profitability:
Empirical
evidence
from
Malaysia
(2012),Pacifi
c-Basin

To examines
whether late
payment
(LP) by
customers
impacts
firms'
profitability.

Late
payment;
Credit
management;
IFRS;
Profitability

Methods/
Data
Gathering
tools/
Respondent
s
Survey
Questionnai
re
delinquency

Major Findings

Random
Sampling
Technique

It was found that 60%

of the sampled firms
experience LP and
LP has a significant
inverse effect on their
profitability; and
those with shorter
credit terms and
Days Sales
Outstanding (DSO)

The microfinance
institutions and selfhelp groups specific
factors and external
factors significantly
affect loan
delinquency
performance among
microfinance
institutions
in Kenya. It
recommends that
MFIs portfolios
management
strategies focus more
on the internal
causes of
delinquency which
they have more
control over and seek
practical and
achievable solutions
to redress
delinquency
problems.

Chris
Mayer,
Tomasz
Piskorski ,
Alexei
Tchistyi

Finance
Journal
Volume 20,
Issue 5,
November
2012, Pages
777792)
The
inefficiency
of
refinancing:
Why
prepayment
penalties are
good for
risky
borrowers
(Journal of
Financial
Economics,
Vol. 107(2),
694 - 714.
2013)

perform better than

those with longer
credit terms and
longer DSO.

To provides a
theoretical
analysis of
the efficiency
of
prepayment
penalties in a
dynamic
competitive
lending
model with
risky
borrowers
and costly
default.

Inefficiency of
refinancing;
Prepayment
penalties;
Risky
borrowers;
Mortgages

Descriptive
Methodolog
y

The results suggest

that regulations
banning refinancing
penalties might have
the unintended
consequence of
restricting access to
credit and raising
rates for the least
creditworthy
borrowers.

The study finds

evidence that penalty
fees are positively
related to measure of
bank market share. It
also finds that fees
are increasing in
customer risk,
supports the position
of defenders of
penalty fees such as
banks. Fees
increasing in
market share is
consistent with rent
extraction, and the
concerns expressed
by politicians and
regulators.
There are high

Nadia
Massoud,
Anthony
Saunders,
Barry
Scholnick

The cost of
being late?
The case of
credit card
penalty fees,
(Journal of
Financial
Stability, 7
(2011) 4959)

To examine,
theoretically
and
empirically,
credit card
penalty fee
pricing.

Credit Cards;
Penalty Fees;
Risk

Using a
unique data
set

Anthony

An Empirical

To identify

Loan Default

Survey

Siaw,
Evans
BrakoNtia
moah,
Emmanuel
Oteng,
Beatrice
Opoku

Alex
AddaeKorankye

Stephen
S. Taxa,
Young
Sally
Kimb,
Sudhir
Naira,

Analysis of
the Loan
Default Rate
of
Microfinance
Institutions;
(European
Journal of
Business
and
Management
(Vol.6,
No.22, 2014)
Causes and
Control of
Loan
Default/Delin
quency in
Microfinance
Institution in
Ghana
(American
international
Journal Of
Contemporar
y Research
Vol.4, No.12,
December
2014)

the causes of
loan default
and the
processes
involved in
granting loan
by
Microfinance
institutions in
Ghana.

Rate;
Monitoring
and
Repayment;
Microfinance
institutions.

positive correlation
between the
constructs of loan
default causes and
how loans are
granted.

To analyze
the causes
and control
of loan
default/delinq
uency in
microfinance
institution in
Ghana.

Loan default;
Loan
delinquency;
Default rate;
Microfinance
Institutions

Random
Sampling
Technique,
Questionnai
re,
Interview

Getting The
Right Payoff
from
Customer
Penalty Fees
(Business
Horizons
Volume 56,
Issue 3,
MayJune
2013, Pages

To identify
the aspects
of penalties
that generate
customer
dissatisfactio
n and
negative
emotional
and
behavioral

Customer
penalties;
Fees;
Relationship
management

Collect and
Analyze
Data

The causes of loan

default to include;
high interest rate,
inadequate loan
sizes, poor appraisal,
lack of monitoring
and improper client
selection. It was
concluded that the
government and
hence Bank of
Ghana
should regularly
monitor and
supervise the MFIs
so as to ensure
safety of clients
deposits and
customers
confidence.
Offered guidelines for
the implementation of
penalties that
balance the goals of
revenue generation
and customer loyalty.
These include:
preventing
unintentional failures,
managing the
perceived magnitude

Young
Sally K.
Kim, Amy
K. Smith

377386)

responses.

Crime and
Punishment
Examining
Customers
Responses
to Service
Organization
s Penalties,
(11/2005),
pages (162180.)

The study
examines the
effects of
penalty
attributes
(severity,
flexibility,
adequacy of
an
explanation),
attributions
(i.e., causal
inference),
perceived
justice,
disconfirmati
on, and
emotion on
customers
evaluations
of penalties
imposed by
service
organizations
,
Crime and
Punishment.

Effects of
penalty
;Customer
Response;
Punishments;

Crosssectional
survey
design

of penalties,
effectively educating
customers on the
offer, ensuring that
penalties are clear
and transparent,
linking penalty
decisions to
responsibility for the
transgression, taking
into account narrowly
missing avoiding a
penalty, and
consideration of the
customer relationship
and employee
empowerment.
The results show that
penalty attributes,
attributions,
perceived justice, and
negative emotion
have significant
effects on customers
responses to
penalties.
Crime and
Punishment. It also
provides useful
guidelines to help
service organizations
manage penalties.

Timothy
Besley,
Stephen
Coate,

Group
lending,
repayment
incentives
and social
collateral
(Journal of
Development
Economics
Volume 46,
Issue 1,
February
1995, Pages
118)

To
investigate
the impact
on
repayment
rates of
lending to
groups which
are made
jointly liable
for
repayment.

Joint Liability;
Lending

Data
Analysis

Moh'd AlAzzama, ,
R. Carter
Hillb, ,
SudiptaSa
rangic,

Repayment
performance
in group
lending:
Evidence
from
Jordan(Journ
al of
Development
Economics
Volume 97,
Issue 2,
March 2012,
Pages 404
414)

Group
lending;
Repayment
performance;
Count data

Data
Analysis

Joseph E.
Stiglitz

Credit
Rationing in

To
investigate
the effect of
screening,
peer
monitoring,
group
pressure,
and social
ties on
borrowing
groups'
repayment
behaviour as
an indirect
test of
different
theoretical
models.
Whether to
extend

Credit
Standards;

Credit
scoring,

The analysis
suggests that such
schemes have both
positive and negative
effects on
repayment rates. The
positive effect is that
successful group
members may have
an incentive to repay
the loans of group
members whose
projects have yielded
insufficient return to
make repayment
worthwhile. The
negative effect arises
when the whole
group defaults, even
when some members
would have repaid
under individual
lending.
It suggests that peer
monitoring, group
pressure, and social
ties reduce
delinquency. The
paper uncovers
interesting evidence
about the role of
social ties and
religion. Most notably,
in an area where
religion contributes to
attitudes and beliefs
of individuals, we find
that religiosity
improves

Although credit
scores can predict a

and
Andrew
Weiss

Markets with
Imperfect
Information, (
71 AM.
ECON. REV.
393 (1981))

Risk of
Defaults;
Credit
Borrowers

Discriminant
analysis,
decision
trees, and
expert
systems

propensity for default,

they are probabilistic
among those in a
particular credit score
range and thus they
imperfectly predict
default for particular
borrowers. Thus, all
potential borrowers
within that credit
score range will pay a
similar risk premium.

Debt Dilution,
Seniority,
Sovereign
Default

Quantitativel
y
Realistic
model,
Creditors

Creditors who lent

first have priority in
any restructuring
proceedings. We
incorporate seniority
in a quantitatively
Realistic model of
sovereign debt and
find that seniority is
quite effective
In mitigating the
dilution problem.

Dealing with
deadbeats
Wall street
journal eastern
edition.
10/1/2007,
vol. 250
issue 77,
pr10. 0p.

credit, how
much credit
to extend,
when
collections
on
delinquent
accounts
should be
initiated, and
what action
should be
taken.
Study
whether the
inclusion of
seniority
clause in
sovereign
debt
contracts is
the reason
on borrowing
too much
and default
too
frequently
To offer
advice for
small
business
owners on
dealing with
clients who
are
delinquent
payers.

ViktarFeda
seyeu

Debt
Collection
Agencies
and the
Supply of
Consumer
Credit (Fed.
Reserve
Bank of
Phila.,
Working
Paper No.
13-38, 2013)

Barlyn,
suzanne
reports@
wsj.com

Small
business;
payment
systems;
business
enterprises

Financial
transactions
processing,
reserve

Banks
Lending

Review the
credit

Credit
practices;

Price level
examination

It cites the benefits of

establishing formal
payment policies. It
mentions the
importance of
determining whether
a customer is
contending with
financial difficulties
and might be able to
recover. It details the
different pre-emptive
measures that can be
adopted by small
businesses.
Finds evidence that
stricter regulation of

William
Dunkelber

Achim
Machauer
and Martin
Weber

Jeffrey B.
Steiner
and Jason
R.
Goldstein

Response to
Restricted
Creditor
Remedies
(Credit
Research
Ctr. Working
Paper No.
20, 1978)
Bank
behavior
based on
internal
credit ratings
of borrowers
(Journal of
Banking &
Finance
Volume 22,
Issues 10
11, October
1998, Pages
13551383)

Construction
Loan
Remedies,
and Lender
Borrower
Relations

practices of
the creditors
and what
collection
methods to
be imposed
on its
borrowers.

rules;
Creditors
collection
methods

creditor remedies
results in higher
prices and lower
levels of credit for
consumers.

In credit risk
management
a usual goal
is to price
loans
according to
their risk
exposure.
The purpose
of this tactic
is obvious.
Lenders
should be
compensate
d for the risk
that
borrowers do
not repay
their loans.
To
conditioning
disbursemen
t of loan
proceeds on
loan
balancing,
construction
loan
documents
limit a
lender's
obligation to
fund in the
event liens
are filed by

Using the
variables of
the debt
contract.

Analysis is
based on
data from
five leading
German
banks.

Found strong effects

of money illusion with
relatively small loan
rate premiums in
times of high market
interest rates and
relatively high ones in
times of low market
interest rates

Project-based
learning, Selfdirected
learning,
Educational
technology,
Higher
education.

Survey

In dealing evidence
and other extrinsic
communications may
help courts fill in the
gaps in contract
language, lenders
should be particularly
careful in
administering
construction loans
and communicating.

AbdulRahman,
H., Kho,
M.,and
Wang, C.

Late
Payment and
Nonpayment
Encountered
by
Contracting
Firms in a
FastDeveloping
Economy ( J.
Prof. Issues
Eng. Educ.
Pract.,
Volume 140,
Issue 2 (April
2014)
10.1061/
(ASCE)EI.19
435541.000018
9)

Brian T.
Melzer

The Real
Costs of
Credit
Access:
Evidence
from the
payday
loans,
Payday
Lending
Market (The

workers at
the property,
as such liens
may threaten
the priority of
the lender's
mortgage
lien.
To identify
the
underlying
causes of
late payment
in the
construction
sector in a
fastdeveloping
economy
Malaysia
and to
develop
effective
solutions to
mitigate this
kind of risk.

To estimate
the real
effects of
credit access
among lowincome
households.

Nonpayment
risk, Late
payment, Fast
-developing
economy, Co
ntracting
firms, Payme
nt
capacity, Cas
h flow risks

Questionnai
re Survey

Findings reveal that

the cash flow
problems due to
deficiencies in clients
management
capacity is the most
significant underlying
cause for late
payment. In
mitigation of late
payment risks,
investigating the
owners ability to pay
was analyzed as the
most effective
solution. Indicators
for late payment and
nonpayment
identified in this study
enable contractors to
forecast payment
risks in both the
current project and
future projects.

Payday Loans

Survey
Questionnai
re

I find no evidence
that payday loans
alleviate economic
hardship. To the
contrary, loan access
leads to increased
difficulty paying
mortgage, rent and
utilities bills.

Marie
Godquin

Quarterly
Journal of
Economics (
2011) 126 (1)
: 517-555.)
Microfinance
Repayment
Performance
in
Bangladesh:
How to
Improve the
Allocation of
Loans by
MFIs (World
Development
Volume 32,
Issue 11,
November
2004, Pages
19091926)

To produce a
comprehensi
ve analysis
of the
performance
of
microfinance
institutions
(MFIs) in
terms of
repayment.

Microfinance;
social ties;
group
homogeneity;
nonfinancial
services

Comparativ
e analysis

Kibosia
Naomi
Chelagat

Determinants
of loan
defaults by
small and
medium
enterprises
among
commercial
banks in
Kenya,
pages 5-23,
2009

This study
sought to
determine
the
relationship
between
Nonperforming
Loans
associated
with SME
sector and its
determinants
among
commercial
banks in
Kenya.

SME factors,
Nonperforming
loans

Descriptive
survey
design,
Commercial
banks

Laura C.
Haynes,
Donald P.

Collection of
Delinquent
Fines: An

To test the
effectiveness
of mobile

Delinquent
fines; text
messaging

Adaptive
trial design

We test for
endogeneity of loan
size and use
instrumental
variables to correct
for it. In the second
section of the paper,
we use a
comparative analysis
of the determinants
of the repayment
performance and of
loan size in order to
make policy
recommendations on
the allocation of loans
by MFIs.
The study found out
that Loan defaults by
SMEs has
significantly been
increasing and a
number of
determinants affected
the loan defaults key
among them interest
rates and how long
the business has
been in operation.
The character of the
applicant has been
found to have a
significant impact on
loan
Defaults
Text messages,
which are relatively
inexpensive, are

Green,
Rory
Gallagher,
Peter John
and
David J.
Torgerson

Daniel F.
Kohler

Mindy
Leow
Jonathan
Crook

Adaptive
Randomized
Trial to
Assess the
Effectiveness
of Alternative
Text
Messages
(Journal of
Policy
Analysis and
Management
Volume
32, Issue
4, pages
718730, Aut
umn 2013)
To pay or not
to pay: A
model of
international
defaults
(Journal of
Economic
Behavior &
Organization
Volume 84,
Issue 1,
September
2012, Pages
216228)
Intensity
models and
transition
probabilities
for credit
card loan
delinquencie
s (European
Journal of
Operational
Research,
volume 236,
January 7,

phone text
messaging
as an
alternative
method of
inducing
people to
pay their
outstanding
fines.

found to significantly
increase average
payment of
delinquent fines. We
found text messages
to be especially
effective when they
address the recipient
by name.

Argue that its

primary
function was
to deter
default in the
first place by
giving
borrowers an
incentive to
disclose
hidden
assets.

Debtors
prison;
Default;
Imprisonment

Empirical
analysis

The results suggest

that states in which
the publishing
industry developed
sooner (thus
facilitating the flow of
information) were
more likely to enact
early bans on
imprisonment for
debt.

We estimate
the
probability of
delinquency
and default
for a sample
of credit card
loans

Risk analysis,
probability of
default,
intensity
modeling,
time-varying
covariates,
state space
modelling,
retail loans

Semiparametric
multiplicativ
e hazard
models with
time-varying
covariates

Results indicate that

different types of
debtors behave
differently while in
different states. The
probabilities
estimated for each
type of transition are
then used to make
out-of-sample
predictions over a
specified period of
time.

J. Crook
J. Banasik

Eyo
Emmanuel
O.1,
Merrian A.
Nwaogu1
and I. A.
Asuquo1

2014, pages
685-694 )
Forecasting
and
explaining
aggregate
consumer
credit
delinquency
behaviour
(International
Journal of
Forecasting,
volume 28,
January
2012, pages
145-160)

Effectiveness
of Loan
Delinquency
Management
Strategies of
Formal
Lenders

We model
aggregate
delinquency
behaviour for
consumer
credit
(including
credit card
loans and
other
consumer
loans) and
for
residential
real estate
loans using
data up until
2008.

Finance, Cointegration,
ARIMA
models, Error
correction
models, Time
series, Unit
roots

Correction
models

We find evidence to
support the portfolio
explanations of
declines in credit
quality for consumer
and for real estate
loans, but support for
the reduced stigma
explanation was
restricted to real
estate loans.
Evidence supportive
of household-level
explanations of
irrational borrowing
and unexpected net
income shocks was
found for consumer
and real estate loans,
but evidence of
strategic default was
restricted to the
volume of consumer
loans and real estate
loans, and not for
credit cards. We also
found that the error
correction model
gave forecasts of the
volume of delinquent
consumer debt which
were of an accuracy
comparable to that of
an ARIMA model.

To assess
the
management
strategies
aimed at
reducing
loan

Loan
delinquency;
formal
lenders;
farmers; Akwa
Ibom State.

Multistage
sampling
technique ;
questionnair
e

The findings in this

research confirm that
the loan delinquency
reducing strategies
were not judiciously
implemented by the
lenders. Also, the

Bismark
Addai and
Chengyi
Pu

among
Farmers in
Akwa Ibom
State,
Nigeria(Britis
h Journal of
Economics,
Management
& Trade,
ISSN: 2278098X,Vol.: 3,
Issue.: Issue
4 (OctoberDecember))

delinquency;
compare the
extent of
loan default
among
lending
institutions
and analyze
the impact of
some
variables in
reducing
loan
repayment
problems,
under the
existing
regime of
loan
delinquency
management
strategies.

The Impact
of Delinquent
Loans on
Financial
Performance
of Banks in
Ghana
(British
Journal of
Economics,

Investigates
into the
impact of
delinquent
loans on
financial
performance
(interest
income and
net profit) of

Delinquent
Loans;
interest
income; net
profit;
financial
performance;
banks;
Ghana

Quantitative
Research
Approach;
Sampling
Method

behavior of selected
variables under the
going delinquency
management regime
suggest that primary
occupation, loan size,
loan use, duration of
loans and visits of
bank officials are
some of the variables
that need to be
manipulated to
achieve the desired
level of loan
repayment.
Invariably, proper
implementation of the
existing loan
delinquency
management
strategies and proper
manipulation of
factors that support
loan repayment
would be invaluable
in enhancing the
effectiveness of the
existing loan
delinquency
management
strategies in reducing
loan repayment
problems in Akwa
Ibom State, Nigeria.
It is recommended
that banks embark on
effective and regular
monitoring of the loan
from the time of
disbursement till the
final repayment as a
means of reducing
delinquent loans and
its antecedent impact

Bassey
Nsikan
Edet1*,
Elizabeth
A.
Atairet1,
Kesit
Kufre
Nkeme1 a
nd Udoh
Ekaete
Sunday1

William
Brent,
Lynne
Kelly,
Debby
LindseyTaliefero,
Russell
Price

management
& Trade,
9(2);1-8,
2015, Article
no. BJEMT.
19268)
Determinants
of Loan
Repayment:
A Study of
Rural
Women Fish
Traders in
Akwa Ibom
State,
Nigeria
(British
Journal of
Economics,
Management
& Trade,
ISSN: 2278098X,Vol.: 4,
Issue.: 4
(April))

Determinants
Of Mortgage
Delinquency
(Journal of
Business &
Economics
Research,
Vol 9, No 2
(2011))

banks in
Ghana.

The paper
estimated
the loan
repayment
index and
examined
the
determinants
of loan
repayment
from a
sample of 80
rural women
fish traders
obtained
through a
multi-stage
sampling in
four selected
markets in
Akwa Ibom
State,
Nigeria.
Examines
mortgage
delinquency
rates for
loans in each
state and
Washington,
DC from
2004 through
2009 in order
to gain
insight into
the key
factors that
drive

of interest income
and net profit.

Loanable
funds;
households;
loan
providers;
loan default.

Descriptive
and
inferential
statistics

Real estate
financing;
foreclosures
and mortgage
lending

Empirical
Analysis

The paper
recommended the
evolution of a more
proactive loan
monitoring procedure
by lenders such as
verification of the
loan worthiness and
previous loan
repayment history of
borrowers before
granting loans,
encouraging the
patronage of formal
credit sources,
pursuing policies that
would reduce
household sizes as
well as the setting up of loan delinquent
court to prosecute
defaulters as the way
out.
The findings suggest
that borrower income,
type of loan, and the
general health of the
economy remain
important in
determining
delinquency
risk. Also, factors that
determine 30- and
60-day delinquency
rates differ from
those that determine
90-day and 90+ day
delinquency rates.

Eric
Arentsen,
David C.
Mauer,
Brian
Rosenlund
,
Harold H.
Zhang,
Feng Zhao

Wei Jiang,
Ashlyn
Aiko
Nelson,
and
Edward
Vytlacil

Subprime
Mortgage
Defaults and
Credit
Default
Swaps
(The Journal
of Finance
, Volume 70,
Issue 2
April 2015
Pages 689
731)
Liar Loan?
Effect of
Original of
Origination
Channel and
Information
Falsification
on Mortgage
Delinquency
(the review
of economics
and
Statistics,
Vol. XCVI,
March 2014,
No. 1)

residential
mortgage
delinquency.
To offer
empirical
evidence on
the adverse
effect of
credit default
swap (CDS)
coverage on
subprime
mortgage
defaults.

To Identify
and qualify
the Microlevel
fundamental
causes of the
mortgage
crisis and
highlight two
major
problem.

Credit Default
Swap;
Subprime
Mortgage

Empirical
Analysis

We find that higher

defaults concentrate
in mortgage pools
with concurrent CDS
coverage, and within
these pools the loans
originated after or
shortly before the
start of CDS
coverage have an
even higher
delinquency rate.

Mortgage
delinquency;
Falsification

Unique
Proprietary
Data Set

We find that thirdparty-originated loans

are more than 50%
more likely to be
delinquent than bankoriginated loans, and
about three quarters
of this difference can
be attributed to lower
borrower and loan
quality based on
observable risk
factors. We find a
strong evidence of
information
falsification among
broker-issue loans.

Questionnaire:
We students from the University of St. Louis Tuguegarao conducting a study about The

Perceived Effects of Imposing Punishments for Delinquent Payment Practices of

Debtors. We humbly ask for your participation by answering honestly the following
questions:
NAME: _________________________YEARS OF EXISTENCE: _________
TYPES OF INSTITUTION:
CAPITALIZATION:

______________________

______________________

DIRECTIONS: Answer the following questions by putting a check mark on the space
provided using the following
1
Never
2
Seldom
3
Often
4
Sometimes
5
Always
QUESTIONS
1. If the debtor dont pay his debt punishment is impose
2. After the punishment is imposed the debtor
immediately pays his due.
3. After the punishment is imposed the debtor goes to
the credit institution to talk about how to settle the
account.
4. After imposing the punishment the delinquency rate
decreases.
5. The punishments affect the payment practices of
debtors.
6. After imposing punishments customers still come to
avail credit.
7. Customers never take any action even if punishments
are imposed.
8. After the punishment is imposed the customer never
avail any credit in the institution.
9. The institution filed lawsuit against the debtor in order
to collect payment.
10. After the debtor settled the account the institution
limits the amount of credit given to the particular debtor.