Application of Logit Model in Personal Credit Ranking
UNIVERSITY OF ECONOMICS HCMC
VIETNAM – THE NETHERLANDS PROGRAMME
FOR M.A. IN DEVELOPMENT ECONOMICS
Application of Logit Model in
Personal Credit Ranking
Econometrics Term Project
Supervisor: Dr. Le Cong Tru
Class 19 – Group 3 – Member list:
Nguyen Duy Chinh
Le Minh Tien
Dinh Thi Tan Hong
Nguyen Hung
April, 2013
Abstract
Personal credit ranking, a new emerged field in banking, has been given the expectation to growth in the next few years. Although various ranking methods have existed for years, it is needed to have credit ranking models for this purpose. From articles in banking, we learnt that logit model (log-odds model) is an effective model for estimating probability, which is suitable characteristic for a customer evaluating model. Following these ideas, our group decided to conduct a research with the subject
“Application of Logit Model in Personal Credit Ranking” which holds the purpose of building an appropriate model for evaluating payment capacity (solvency) of customers based on characteristics of Vietnamese personal borrowers. We applied the theory of Logit model, with the support from various empirical researches, especially
Vuong Quan Hoang’s, and the dataset from Saigon Commercial Bank, to form a model with six independent variables (Education level, Number of customer’s dependants, Marital status, House ownership, Salary payment method, Monthly income). Although the data sample is small and limited in detailed variables, it is believed that our model still has a reasonable accuracy and reflects truthfully the nature of Vietnamese customers.
Our conclusion centered on the following main points:
Age and gender has no impact on the solvency of personal customers.
All other variables have their signs followed initial expectation and common senses. Education level and marital status has strongest marginal effect on the solvency of personal customers.
1
Contents
1. Introduction
VIETNAM – THE NETHERLANDS PROGRAMME
FOR M.A. IN DEVELOPMENT ECONOMICS
Application of Logit Model in
Personal Credit Ranking
Econometrics Term Project
Supervisor: Dr. Le Cong Tru
Class 19 – Group 3 – Member list:
Nguyen Duy Chinh
Le Minh Tien
Dinh Thi Tan Hong
Nguyen Hung
April, 2013
Abstract
Personal credit ranking, a new emerged field in banking, has been given the expectation to growth in the next few years. Although various ranking methods have existed for years, it is needed to have credit ranking models for this purpose. From articles in banking, we learnt that logit model (log-odds model) is an effective model for estimating probability, which is suitable characteristic for a customer evaluating model. Following these ideas, our group decided to conduct a research with the subject
“Application of Logit Model in Personal Credit Ranking” which holds the purpose of building an appropriate model for evaluating payment capacity (solvency) of customers based on characteristics of Vietnamese personal borrowers. We applied the theory of Logit model, with the support from various empirical researches, especially
Vuong Quan Hoang’s, and the dataset from Saigon Commercial Bank, to form a model with six independent variables (Education level, Number of customer’s dependants, Marital status, House ownership, Salary payment method, Monthly income). Although the data sample is small and limited in detailed variables, it is believed that our model still has a reasonable accuracy and reflects truthfully the nature of Vietnamese customers.
Our conclusion centered on the following main points:
Age and gender has no impact on the solvency of personal customers.
All other variables have their signs followed initial expectation and common senses. Education level and marital status has strongest marginal effect on the solvency of personal customers.
1
Contents
1. Introduction
References: Dinh, T. H., & Kleimeier, S. (2007). A credit scoring model for Vietnam 's retail banking market Fishelson, H., & Holstine. (2004). The Role of Credit Scoring in Increasing Homeownership for Underserved Populations Gujarati, D. (2011). Econometrics by Example. Palgrave Macmillan. Hoang, V. Q., Hung, D. G., Huu, N. V., Ngoc, T. M., & Phuong, L. H. (2006). Phương pháp thống kê xây dựng mô hình định mức tín nhiệm khách hàng thể nhân Ramanathan, R. (2002). Introductory Econometrics with Applications. Harcourt College Publishers.