The Research Of Influencing Factors Of LGD For Micro-credit Loans

The loss given default(LGD)is the basic index to measure the degree of loss after a single transaction was defaulted.It is as important as the default probability(PD),related to the risk policy,the measurement of risk asset and loan pricing and other aspects.Micro-credit loans without risk prevention measures,such as mortgage or security,etc.It is completely different from the nature of corporate loans with mortgage.Then its risk has its own characteristics.The existing research on the risk of micro-credit loans is concerned with the probability of default,and the research of its LGD is very few.This paper will study the LGD of micro-credit loans.Based on the analysis of existing literature,this paper seted up a method to measure the LGD of micro-credit loans.And using the historical public data of a network lending platform,we calculated the LGD.The distribution of LGD of micro-credit loans is different from the U type distribution of corporate loans.It is more balanced and the zero loss samples accounted for less.Its mean value is about 57%,and it is' t bigger than the LGD of other types loans.Statistical analysis results of micro-credit loans' LGD show that:There is a big difference in LGD in different regions.LGD of economically developed regions is lower.LGD was negatively correlated with the scale of risk exposure:the loan amount is small,but the LGD is higher;With the increase of the loan period,the LGD has a tendency to decrease.Through the analysis of the ordered Logistic model,it is found that there are three aspects factors significant affect on the LGD.They are the characteristics of the debt,the characteristics of the debtor and the debtor's behavior.In terms of debt characteristics,the amount of debt and the duration of the debt have a significant negative impact on the LGD;The LGD in the developed eastern region is lower than western.In the characteristics of the debtor,the LGD of high degree of education borrowers is lower;women's risk appetite is lower in financial decision,so their LGD is lower.In terms of the debtor's behavior,the history of borrowing behavior,investment behavior and the loan statement has a significant impact on the loss rate of default.The number offailures and the number of words in the loan statement have a negative impact on the LDG.Because the length of the statement of the loan shows the extent of the borrower's efforts and transfer of more information,it alleviates the information asymmetry.Investment behavior indicates that the borrower is more understanding of the web lending platform.And the investment on the platform is the implicit guarantee of the loan,so the LGD is lower.Because the characteristics of debt,the debtor characteristics and the debtor's behavior have an impact on the LGD of micro-credit loans,so we should pay attention to these factors.Credit risk measurement and loan management can be carried out according to the characteristics of the area;The factors influencing the LDG may can be considered into credit rating.Grasping the characteristics and influencing factors of the LGD may can helps to identify,control and measure the risk of micro-credit loanss.