Organisations or individuals that lend money (banks and micro lenders) or that sell goods on credit (retailers) are classified as credit providers. The debtor enters into a contractual agreement with a credit provider, or creditor, with the obligation to repay the loan amount, fees and interest according to a predetermined schedule. The contractual agreement, also known as a credit agreement, is as a general rule very complex. Legislation protecting debtors in various ways is an international phenomenon. In South Africa, the National Credit Act, Act 34 of 2005 (NCA) was enacted in 2005. The NCA changed the playing field for credit providers participating in the South African consumer credit market to a great extent. Consumer lending is the sleeping giant of the financial sector. The key to successfully unlock this enormous market is the credit provider's ability to accurately assess the creditworthiness of a potential customer during the customer acquisition phase. The creditworthiness of the customer is related to the risk of default, i.e. a debtor's non-payment of debt in terms of the credit agreement. The risk of default is also known as credit risk. Real People Investment Holdings (Pty) Ltd (RPIH) classifies credit risk as the single largest risk the Group is exposed to. They recognise that the intelligent and responsible management of credit risk makes it the Group's largest profit driver. Credit risk scorecards are excellent decision aids during the customer acquisition phase. The characteristics and behaviour of merchants submitting credit applications to RPIH for assessment have a definite impact on the credit risk of the Group. The merchant plays a pivotal role in the debtor-creditor-supplier business model. The merchant influences the customer's sales experience and subsequent level of satisfaction with the transaction. A satisfied customer constitutes a lower level of credit risk for the creditor, in this case RPIH. The research is conducted with a positivistic paradigm. The cross-sectional study approach is used. The merchant is the unit of analysis. A sample of 77 merchants is selected from the population of 244 merchants who submitted credit applications to RPIH during the observation period. Questionnaires are used as the data collection method in this research project. The predictive ability of fourteen merchant related characteristics are demonstrated through this empirical study.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:nmmu/vital:8650 |
| Date | January 2010 |
| Creators | Schutte, Philippus Jacobus Wilhelmus |
| Publisher | Nelson Mandela Metropolitan University, Faculty of Business and Economic Sciences |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis, Masters, MBA |
| Format | xviii, 121 pages, pdf |
| Rights | Nelson Mandela Metropolitan University |
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