| dc.description.abstract | Credit risk management is important for any financial institution, as the focus is to ensure
efficient collection of customer payments and to reduce the risk of non-payment. This
study analyses the factors that determine credit worthiness of Visa Card holders of the
Kenya Post Office Savings Bank through review of performance of a sample of
cardholders. Secondary data comprising 30 non-defaulters and 30 defaulters was
collected from existing customers application forms. The classification was based on
those who have ensured prompt repayment of amounts due and those who have ever
defaulted.
Analysis was done of the scoring of the card holders and their subsequent performance in
relation to the variables: age, marital status, average monthly income, time at current
employment, housing type, type of bank account, number of unpaid cheques, employer's
guarantee, other card issuer's remarks, time at residence and availability on phone. The
performance of the card holders in relation to each of the variables was assessed and their
overall performance in relation to their scoring was also analysed. Younger customers
aged between 22 and 45 were found to be good payers. Married customers were found to
be more credit worthy than those who were single. A general trend was established
whereby the longer a customer had stayed in their current employment the more credit •
worthy they were. However, there was an exception with the longest serving (those who
had been with their employer for over 140 months) ;';·ereby 50% were defaulters and
50% were non-defaulters.
Currently Postbank uses a scorecard where the variables are scored based on the
applicant's personal information. The factors are not weighted although more marks are
lost where a cardholder has ~ued unpaid cheques or has adverse comments from other
card issuers. It is important for Postbank to give the variables weights with emphasis on
marital status, time at current employment, number of unpaid cheques, other card issuers
remarks and type of bank account as identified by the study | en |
