A Conceptual Framework for Bounded Rationality in Bank Officers’ Credit Decision for SME Lending in Malaysia

Based on the Bounded Rational Theory, ideally, bank credit officers would be influenced by both rational (fundamental factors) and irrational (behavioural factors) in their credit assessment and decision making process. Emphasizing on the irrational decision making perspective, behavioural factors distort the credit decision making process in the banking industry. Despite such evidence, the psychology perspectives in bank lending practice has been given little attention in research and neglected in practice and policy perspectives. This conceptual research investigated the role of irrationality in bank lending decision making. The research design involved three stages. The research started with conceptualization of the bounded rational credit decision framework. This was designed based on review of three theories and related empirical evidence. In the second stage, constructs and their measurement items were sourced from prior work. Thereafter, a questionnaire was developed. In the third stage, the validity of the questionnaire was tested using expert validation, pre-test and pilot-test involving 30 credit officers working in business banking division of a Malaysian bank. Findings from the pilot study confirmed the validity of the questionnaire as an instrument that can be used for future empirical test. This bounded rational credit decision framework can guide further empirical analysis on the role of behavioural factors in lending decision making. The framework provides new insights that are valuable in enhancing the SMEs lending theory, practice, and policy. Keywords: behavioural finance, bounded rational theory, business banking, credit decision, small and medium-sized enterprises (SMEs)

Drivers of lending decision in peer-to-peer lending in Malaysia

PurposeDespite the emergence of peer-to-peer (P2P) lending in Malaysia, there is a knowledge gap on what drives the lending decision of P2P lending in the emerging Malaysian market. This research investigates how borrower's loan tenure, funding purpose, verified documents, accumulated transaction and repayment history, age, trustworthy and geographical resemblance affect likelihood of lending decision in P2P platform.Design/methodology/approachUsing snowball sampling, survey data was collected from 300 online banking users who were willing to invest in online P2P platform from different states in Malaysia (i.e. Selangor, Malacca, Johor and Negeri Sembilan). For estimation, regression analyses were estimated.FindingsThe findings suggest that borrower's loan tenure and borrower's age increase the probability of lending in online P2P platform, while funding purpose of credit card reduces the likelihood of lending in the P2P platform. The findings contribute to the signalling theory.Practical implicationsThe findings imply that borrowers need to concentrate on loan tenure and clearly indicate their age in the listing in order to increase the funding probability. Moreover, they are suggested not to submit listing for credit card as funding purpose.Originality/valueThis study is first in its nature about P2P lending in Malaysia and the possible factors that influence lending decisions in this new financing platform.

Nonperforming loans in Palestinian banks - analysis and treatment: القروض المتعثرة في البنوك الفلسطينية – التحليل والعلاج

The study aimed to identify the reality and causes of non-performing loans phenomenon in Palestinian banks and proposed mechanisms to address them. The researchers used the descriptive analytical approach, and they built a questionnaire as a study tool in addition to using secondary data published by the Palestinian Monetary Authority during the year 2019, and the study population consisted of (75) banks and branches, the population of the study population reached 450 employees. The study was conducted on a sample consisting of (190) employees and managers of facilities employees and bank managers and their branches, who were chosen in a systematic, stratified, random manner. The results showed that there is an increase in the size and percentage of non-performing loans in the Palestinian banking sector during the study period, and that the most important reasons for faltering loans were related to the borrower himself, ranked first with an arithmetic average (3.74) and a relative weight (74.8%), followed by the causes of default related to the bank itself with an arithmetic average (3.02) and relative weight (60.4%), then the default causes that are outside the borrower's and the bank’s control with an arithmetic average (2.99) and a relative weight (59.8%), and finally defaulting related to laws, regulations and laws with an average arithmetic (2.97) and relative weight (59.4%), arithmetic mean For the total score of the causes of default reached (3.18), with a percentage of (63.6%). Based on the results, the researchers recommended: the necessity of establishing departments and divisions for dealing with nonperforming loans to ensure the study of the borrower in terms of the type of activity and how to use the loans, not to rely on guarantees only when granting the lending decision, and that he be dependent on the economic feasibility of the project and follow-up.

PROVISION OF MICRO CREDIT AT BANK MANDIRI BOGOR WITH THE FUZZY TSUKAMOTO METHOD

It is an advantage for the bank, in this case, the Bank Mandiri Dramaga1 Bogor Unit, because of the increasing credit activity in banks, it is necessary to have an assessment in credit as consideration for prospective customers before the bank decides to accept or reject a prospective customer request. So it is necessary to develop a method that can assist and facilitate the bank in making decisions quickly and accurately. The basis for decision making is based on the criteria for determining who is eligible or not to receive a loan. To assist in determining whether someone is eligible or not to receive a loan, a decision support system is needed using fuzzy logic and applying the Tsukamoto method. The Lending Decision Support System was created to assist and facilitate the bank in making decisions to provide alternatives if a prospective customer applies for credit is accepted or not.

Impact of Accounting Information on Bank Lending Decisions: A Case Study of First Bank, Bwari Area Council, Abuja

This study seeks to ascertain impact of accounting information on bank lending decisions: A case study of First Bank, Bwari Area Council, Abuja. The study used primary data over a period of one year (2015). The questionnaire focuses on the core staff, contract staff and other staff of First Bank in Bwari Area Council, Abuja. We administered forty (40) questionnaires to respondents of the bank but the total respondents used for this study was thirty-two (32). Simple percentage was used to draw conclusions on the researcher’s questions while Chi – Square was employed in testing the hypothesis through the use of SPSS software package. Results of the investigation show that accounting information received from loan applicants significantly influence First Bank’s lending decision among others. We therefore recommend that banks must employ well trained analysts in the profession, who will be responsible for analyzing each customer’s financial statements for proper interpretation strictly based on merit and also advocate the need to monitor the affairs of any successful loan applicant to ensure that the progress of the project is on course and the loan is not diverted.