Journal of
Economics and International Finance

  • Abbreviation: J. Econ. Int. Finance
  • Language: English
  • ISSN: 2006-9812
  • DOI: 10.5897/JEIF
  • Start Year: 2009
  • Published Articles: 350

Article in Press

Credit Risk Evaluation Modeling: A Logit Approach

Alabi, M.A and Issa, Suleman

  •  Received: 09 August 2018
  •  Accepted: 23 October 2018
Credit scoring is a method that is used to determine the risk factors relevant to undertake an obligatory task and wiliness to pay. This research paper is aimed at evaluating credit risk model, based on the logit model approach. Various performance indices were used such as; average success rate, sensitivity, specificity, and misclassification cost (type I and II errors). The measure of accuracy and reliability of the model was also conducted. The results indicated that the logit model provides very good performance rate for credit scoring and risk assessment. Moreover, the logit model shows the empirical evidence that the applicant background and credit history such as marital status, length of service and amount request. These p-values of 0.021 (p<0.05), 0.001 (p<0.01), and 0.003 (p<0.01) respectively have significant impact on the credit applicant at 0.05 and 0.01 levels of significant which could evaluate credit risk.

Keywords: Credit scoring, Credit risk evaluation modeling, logit, Salary advance scheme.