Estimating the determinants of vehicle loan default in Malaysia: an exploratory study

As revealed by Malaysia’s bankruptcy statistics, around a quarter of bankruptcy in Malaysia is due to default of vehicle loan.This has led to the tightening up of vehicle loan underwriting and increased vehicle loan rejection rates. The need for a better credit risk scoring model is also raised by the banks.This warrants a study to estimate the determinants of vehicle loan default in Malaysia.This paper estimates the determinants of vehicle loan default probability which could be used to build a loan default prediction or forecasting model for credit risk scoring purposes.Using a simple random sample of 138 car loan borrowers that was provided by an established bank in Malaysia, the descriptive statistical procedures and econometrics modelling were performed to unveil these vehicle loan default determinants.Results of descriptive statistics revealed that more than half of the borrowers were default.Results of logit models further revealed that loan related characteristics are the most important determinants of probability of default.Specifically, the significant determinants of loan default were: areas of residence, vehicle purchase price, length of service, existing relationship with bank, interest rate, and available guarantor.Borrowers who are in high risk of default are characteristically those who reside in rural areas, secure higher vehicle purchase price, have longer length of employment service, are borrowers new to the bank, acquire loans charged with high interest rates, and are without a guarantor

Estimating the determinants of vehicle loan default in Malaysia: an exploratory study

As revealed by Malaysia’s bankruptcy statistics, around a quarter of bankruptcy in Malaysia is due to default of vehicle loan.This has led to the tightening up of vehicle loan underwriting and increased vehicle loan rejection rates. The need for a better credit risk scoring model is also raised by the banks.This warrants a study to estimate the determinants of vehicle loan default in Malaysia.This paper estimates the determinants of vehicle loan default probability which could be used to build a loan default prediction or forecasting model for credit risk scoring purposes.Using a simple random sample of 138 car loan borrowers that was provided by an established bank in Malaysia, the descriptive statistical procedures and econometrics modelling were performed to unveil these vehicle loan default determinants.Results of descriptive statistics revealed that more than half of the borrowers were default.Results of logit models further revealed that loan related characteristics are the most important determinants of probability of default.Specifically, the significant determinants of loan default were: areas of residence, vehicle purchase price, length of service, existing relationship with bank, interest rate, and available guarantor.Borrowers who are in high risk of default are characteristically those who reside in rural areas, secure higher vehicle purchase price, have longer length of employment service, are borrowers new to the bank, acquire loans charged with high interest rates, and are without a guarantor

Deciphering drivers of efficiency of bank branches: Malaysian reality

Measuring and bench marking efficiency of bank branches has always been one of the key areas of concern of the top management of banks.It has also been on the research agenda of many scholars across many countries who have published their work in various academic journals.In Malaysia, a country which is one of key emerging nations in south-east Asia, there are many studies which dealt with measuring efficiency and productivity of banks using various operational research techniques including non-parametric Data Envelopment Analysis (DEA) technique.However, so far there is no published work which addressed the efficiency drivers at the branch level.Present paper aims to fill-in this gap in the literature. A two-stage approach has been adopted in analyzing the financial performance of 247 branches in 2014 spread over 14 states of the country of a large commercial banking group in Malaysia. In the first stage of analysis, the study has adopted DEA technique input oriented variable returns to scale formulation to estimate the technical efficiency of these branches.Four input parameters viz., Interest Expense, Personnel Expenses, Establishment expenses and Other Operating Expense have been used as input parameters and Total Deposit, Total Loan, Amount of Wealth Management Business, Interest Income and Non-Interest Income have been used as output parameters.These parameters are reflective of the Inter mediation and Profit efficiency of the branches.In view of potential bias in the estimation process, the efficiency scores obtained in Stage-1 of the analysis were bootstrap corrected using the formulation of Bogetoft & Otto before they were used as dependent variable in Stage-2 of the analysis where Tobit Regression was carried-out to decipher the drivers of efficiency of bank branches.Four possible driver variables like log of total business (to assess the effect of ‘size’ on efficiency), log of Current and Savings account deposit (CASA) to Total deposits (to assess the impact of deposit mix on efficiency), log of Deposit per employee, log of Loans per employee and Income per employee (to assess the impact of Productivity of manpower on efficiency), Business per transaction (to assess the impact of Transaction efficiency) have been used in the Tobit regression.In addition, two environmental dummies viz., Per Capita State Gross Domestic Product and the level of Competition in garnering business in each state (measured in terms of percentage of branches in each state of the country) to reflect the impact of spatial parameters as possible drivers of efficiency have been used at this stage of the analysis.Results suggest that deposit per employee is significant(at 1%) driver of efficiency of branches; size has a negative effect (significant at 5%) in determining branch efficiency probably reflecting of the aim of the Bank to focus more on revenue growth at the aggregate level rather than cost efficiency at the branch level. Other significant ( at 10%) drivers of branch efficiency are CASA to total deposits and Business per transaction with CASA playing dominant driver amongst all the drivers of efficiency of branches of the bank.Loan per employee was not found to be significant probably due to the fact that branches do not have power to sanction loan. Per capita GDP was found to be positive driver of efficiency; the effect however, is more dominant in branches which are located in states in top 25th percentile GDP per capita.Similarly, competition was found to be positive driver of efficiency in branches located States in top25th and 50th to 75th percentile in terms of branch concentration.The results reported in the study would not only be of key interest of the top management of banks but also to Bank Negara Malaysia, the central bank of the country which is keenly fostering efficiency in the Malaysian banking arena ever since it carried out the merger and consolidation in the financial services sector in 2000. The results would also attract the attention of future researchers in the arena of Malaysian banking

Are the Malaysian students “unskilled” and “unaware”?

Since the financial crisis of 1998, graduate unemployment problem has been persistent and the lack of generic skills, i.e. “unskilled”, has been pointed out as one of the causes.However, the “unskilled” alone could not lead to the persistence of graduate unemployment.The co-existence of “unskilled” and “unaware” could be the cause. This paper aims to estimate the existence of “unskilled and unaware” phenomena using a sample of Malaysian students. Results reveal that the students significantly over-perceived their level of generic skills, as compared to employer’s evaluations.This indicates that the students are “unaware” of their unskilled. Results also reveal that this “unaware” is significantly related to the unskilled students. The unskilled students are more likely to be unaware. Thus, the phenomena of “unskilled and unaware” exist among the Malaysian students. The unskilled students are simply not aware until they enter into the labour market and suffer unemployment.Since a new group of “unskilled and unaware” students enters into labour market every year, this leads to the persistence of graduate unemployment in Malaysia

Evaluating performances of Malaysian banks in RAROC and EVA framework: a new perspective

As Malaysian Banks are stepping into the Basel-III era, a close look at their performance on risk adjusted basis using RAROC and EVA would throw significant light on their relative strengths and weaknesses.Following the Asian Financial Crisis, Bank Negara Malaysia (BNM) fostered strategies to strengthen and an orderly development of the financial system in the country.Under the said initiatives, the banking system in the country underwent restructuring, mergers & consolidation and rationalisation during 1998-2000.The regulatory framework of BNM throughout the decade of 2001-10 was mainly centered on capitalization, risk management and governance practices in banks. It is now nudging the banks to graduate to the more stringent capital and liquidity requirements in the Basel-III era.Though numerous studies have evaluated the performances of Malaysian commercial banks in terms of efficiency and productivity gains before and after the merger and also at various phases during the last decade, no study has so far been reported assessing their performances using RAROC and EVA framework. Present study, fills up this enormous gap in the literature and report its findings in its evaluation of the performances of eight commercial banks during 2001 to 2012 period.The findings of the study would be of keen interest to the policy planners, investors and researchers alike

Household Indebtedness in Malaysia: A Survey Evidence

Increasing trends in using debts as a mechanism to fill the gap between income and expenditures among Malaysian households motivates this study. This study provides a survey evidence on the indebtedness of Malaysian household, particularly in the types of loans which Malaysian households frequently involved in, whether the debts become a financial burden to the households and whether Malaysian households have any alternative source of income as a financial backup for their main income. The survey shows that most Malaysian households having debts in hire purchase loan, debt service ratio of less than 60% and most of them have no alternative source of income. The survey was done on households in three northern states of Malaysia

Managing risk of hire purchase financing at SnF Bank

A new CEO was appointed for the SnF Bank and a management reshuffle was carried out with the aim of increasing the loan volume and to improve the quality of loan assets. Following the appointment of the CEO, in 2009, Mr. Ben Gan was appointed as the new Head of Hire Purchase Financing Division of the bank.On the first day in his new position, Mr. Ben had a meeting with the new CEO. He was given the task to improve the quality of the auto financing portfolio. After going through the bank reports, he decided to plan the strategies and the credit underwriting policies to manage the risk in hire purchase financing.This case is designed to assist students to identify risks and analyze the risks in consumer lending environment.The students will also learn how to mitigate risks in lending

Systematic comparison of plasma EBV DNA, anti-EBV antibodies and miRNA levels for early detection and prognosis of nasopharyngeal carcinoma

Nasopharyngeal carcinoma (NPC) is originated from the epithelial cells of nasopharynx, Epstein-Barr virus (EBV)-associated and has the highest incidence and mortality rates in Southeast Asia. Late presentation is a common issue and early detection could be the key to reduce the disease burden. Sensitivity of plasma EBV DNA, an established NPC biomarker, for Stage I NPC is controversial. Most newly reported NPC biomarkers have neither been externally validated nor compared to the established ones. This causes difficulty in planning for cost-effective early detection strategies. Our study systematically evaluated six established and four new biomarkers in NPC cases, population controls and hospital controls. We showed that BamHI-W 76 bp remains the most sensitive plasma biomarker, with 96.7% (29/30), 96.7% (58/60) and 97.4% (226/232) sensitivity to detect Stage I, early stage and all NPC, respectively. Its specificity was 94.2% (113/120) against population controls and 90.4% (113/125) against hospital controls. Diagnostic accuracy of BamHI-W 121 bp and ebv-miR-BART7-3p were validated. Hsa-miR-29a-3p and hsa-miR-103a-3p were not, possibly due to lower number of advanced stage NPC cases included in this subset. Decision tree modeling suggested that combination of BamHI-W 76 bp and VCA IgA or EA IgG may increase the specificity or sensitivity to detect NPC. EBNA1 99 bp could identify NPC patients with poor prognosis in early and advanced stage NPC. Our findings provided evidence for improvement in NPC screening strategies, covering considerations of opportunistic screening, combining biomarkers to increase sensitivity or specificity and testing biomarkers from single sampled specimen to avoid logistic problems of resampling

Environmental assessment and improvement strategies for electric bus operations

In accordance with worldwide environmental problems and fossil oil dependency concern, green mobility with electric buses is receiving increasing attention as an essential road transport. Environmentally, electric buses emerge as a promising solution in particular to alleviate the emission and noise pollution. Nevertheless, there is no available method on how to quantify green (environmental) performance of electric buses that could provide proper guidance to the bus operators. Therefore, this study aims to construct a green index assessment and improvement framework for electric buses by capturing bus noise, emission and energy consumption level explicitly. The proposed framework, which is capable of quantifying the green level of electric bus operations, plays a vital role in improving the green performance of bus operating system, by considering numerous operational aspects. In order to examine the applicability of the proposed approach, an illustrative case study, focusing on the electric bus operations of Putrajaya (Malaysia), is analyzed accordingly. The resultant findings show that the green performance of electric buses would be different at varying degrees, depending on various inter-correlated factors. It is anticipated that this study may reveal some beneficial insights for the bus operators to operate environmental-friendly electric buses feasibly