Improving credit scores for individuals and small businesses: implications for digital bank's credit risk

Yu, Zi Jun (2024) Improving credit scores for individuals and small businesses: implications for digital bank's credit risk. Final Year Project, UTAR.

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Abstract

The rapid growth of digital banking has revolutionized the financial landscape globally, presenting novel opportunities and challenges for individuals and businesses alike. This study investigates the implications of improving credit scores for individuals and small businesses, particularly focusing on the context of digital banks' credit risk in Malaysia. The research methodology employs a descriptive approach, utilizing secondary data sourced primarily from Indian digital banking platforms, considering their emerging relevance to the Malaysian market. Challenges pertaining to data availability, quality, and applicability are identified, stemming from the nascent stage of digital banking in Malaysia and the cross�border nature of the data sources. Despite these limitations, the study endeavors to provide valuable insights into the relationship between borrowers' credit profiles and digital banking practices. Findings from exploratory factor analysis, Pearson correlation analysis, and descriptive statistics offer nuanced perspectives on the factors influencing credit scores and loan profiles in the digital banking domain. Theoretical implications underscore the evolving dynamics of credit assessment methodologies within the digital banking paradigm, while practical implications highlight the potential for enhancing risk management strategies and financial inclusion initiatives. Limitations inherent in the study, including data accessibility constraints and the need for further validation, are acknowledged, yet they do not diminish the significance of the findings. Instead, they serve as catalysts for future research endeavors aimed at unraveling the complexities of digital banking ecosystems and fostering sustainable financial practices. Through a comprehensive examination of credit scoring mechanisms and loan profiles, this study contributes to the broader discourse on digital finance and its transformative impact on financial services provision in emerging markets like Malaysia.

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