Factors that reduce the probability of loan payment default by survival analysis of Zimbabwean SMEs

Tan Zhongming, Liberty Munashe Fungurai, Ding Guoping



This study focuses on modelling the probability of Small to Medium Enterprises (SMEs) defaulting payment in the event of them receiving loans.Under investigation were the factors that affect both default and survival of businesses since the default probability was based on survival analysis. Data drawn was analyzed using Cox Regression, a semi-parametric survival technique whose aspects of hazard and survival functions were a base for the analysis.The results interpreted on the basis of the fitted hazard ratios and overall Cox Proportional Hazards Model indicated that there is an inverse relationship between probability of survival and that of default. As reflected by the outcome of this study, businesses that have more time in operation are less likely to default payment. Entrepreneurs pee-possessing self-employment, work experience and training qualifications, have a positive impact on survival of the businesses they are to start and run. In addition,the size of a loan and location of a business have no significant effect on the hazard(risk) associated with lending to SMEs. Implications of the study, limitations and future research directions are also discussed.


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Zimbabwean Monetary Policy Statement, January 2016


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