A Hidden Markov Model of Risk Classification among the Low Income Earners

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dc.contributor.authorNtwiga, Davis Bundi
dc.contributor.authorOgutu, Carolyne
dc.contributor.authorKirumbu, Michael Kiura
dc.contributor.authorWeke, Patrick
dc.date.accessioned2022-12-08T14:29:48Z
dc.date.available2022-12-08T14:29:48Z
dc.date.issued2018-12-18
dc.descriptionJournal Articleen_US
dc.description.abstractLow income earners have volatile incomes and most financial providers shun this group of borrowers even though they are motivated in managing the limited resources they have through savings and investments as a means to lower the fluctuations of their income. Peer groupings of the low income earners can assist in pooling the resources they have and improve the group risk mitigation process as group members act like social collateral in credit lending. The study used Kenya Kenya Financial Diaries data of 2013 from 280 households to analyze and understand the credit quality levels and credit scores of peer groups versus individuals among men and women. Hidden Markov model classified the low income earners into credit risk profiles wih a view of understanding the role of groups in low income group lending. Peer groups diversify risk inherent in individual borrowers with women only groups having higher credit quality levels as compared to men only groups. Women and their respective peer groups are more stable with less variability as compared to men. Financial technology providers can incorporate the wide array of soft information to lend to low income earners through mobile based peer groups.en_US
dc.description.sponsorshipSchool of Mathematics, University of Nairobi And School of Sciences and Engineering, Daystar Universityen_US
dc.identifier.citationDavis Bundi Ntwiga, Carolyne Ogutu, Michael Kiura Kirumbu, and Patrick Weke, “A Hidden Markov Model of Risk Classification among the Low Income Earners.” Journal of Finance and Economics, vol. 6, no. 6 (2018): 242-249. doi: 10.12691/jfe-6-6-6.en_US
dc.identifier.urihttps://repository.daystar.ac.ke/handle/123456789/3988
dc.language.isoenen_US
dc.publisherJournal of Finance and Economicsen_US
dc.subjectHidden Markov Modelen_US
dc.subjectMenen_US
dc.subjectWomenen_US
dc.subjectPeer Groupsen_US
dc.subjectCredit Qualityen_US
dc.subjectRisk Classificationen_US
dc.subjectLow Income Earnersen_US
dc.subjectCredit Scoreen_US
dc.titleA Hidden Markov Model of Risk Classification among the Low Income Earnersen_US
dc.typeArticleen_US

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