Determinants of Home Loan Delinquency: The case of IDLC Finance Limited

Abstract

While analyzing the loan delinquency behavior of home-loan borrowers of
a Bangladeshi non bank financial institution, this paper investigated the
determinants of home-loan delinquency. The primary contribution of the research
delineated in this paper is to demonstrate the importance of borrower specific
characteristics in determining the risk of credit loss on housing loan repayment for
the lending institutions. It has been documented that the financial aspects of
customers have significant influence on timely home-loan repayment risk. Firstly,
customers with high loan to value ratio, high fixed obligation to income, higher debt
burden ratio and higher installments to income ratio force the borrowers to become
delinquent. Secondly, for the lending institutions the behavioral aspects should also
be strongly considered, since it is evidenced in developing countries like Bangladesh,
that though the customers might have high income or high property value yet they
might be delinquent because of lack of their willingness to repay timely.