Credit Risk Model for Micro, Small, and Medium Enterprise (MSME) Loan at Bank XYZ

Ruslan Abdul Nasser, NunungNuryartono, Hari Wijayanto

Abstract: This study investigate the determinants of micro, small, and medium enterprises (MSMEs) repayment by employing the cox hazard regression on MSMEs business at Bank Y. The result of this study reveals that loan repayment affected significantly by the characteristics such as gender, age, marital status, education level, business location, business sector, business experience, installment to proit ratio, tenor, and amount of installment. Interestingly the result concludes that business profit do not significantly encourage borrowers to repay. This study also conform the important role of peer-screening process on hindering the credit default using survival curve to minimize adverse selection.

Keywords: adverse selection, survival analysis, credit default, cox hazard regression, MSMEs