Variables

Description

Dependent [Loan default (DEF)]

Loan default which is the dependent variable is a probability of a Credit Union member or loan customer not repaying loan on time (defaulting) and repaying loan on time (not defaulting). It is a dichotomous dummy variable and took the value 1 if a member has ever defaulted in loan repayment and 0 if a member has never defaulted in loan repayment. To capture this variable, a member who has received loan was asked whether the loan was repaid on time and the responses were two; either “yes” or “no”.

Independent [Age]

The age variable represents the actual age of the respondent. The age variable in the study is measured in continuous terms as the actual age (in years) of the Credit Union members or loan customers interviewed. The age variable is expected to have a positive relationship with loan default.

Independent [Sex]

Sex is the gender (male or female) of the respondents and is measured a binary dummy variable. It takes the value 1 if a respondent is a male and 0 if female. The relationship between sex (being male) and loan default is expected to be positive.

Independent [Marital Status]

Marital status variable categorizes the respondents into their respective marital positions. The marital status variables has four categories and were assigned the values 1, 2, 3 and 4 for being single, married, separated and widowed. However, due to insufficient number in some of the categories which could affect the result, the variable was converted to a binary dummy variable; married and other category which comprises single (never married), separated and widowed. The Married category was assigned the value 1 and the “other” category was assigned the value 0. The study expects a negative relationship between being married and loan default.

Independent [Educational Level]

Education variable represent the formal education received by the respondents. The variable has five categories and is measured a dummy; none, primary/JHS, secondary, tertiary and other which comprises higher degree. Education variable is expected to correlate positively with loan default.