A glance at critical defaulting debtors. The non-banking credit sector in Costa Rica

Purpose This study aims to identify the profile of critical defaulting debtors (non-recoverable or judicial collection) in the non-banking credit sector. It should be noted that there is abundant literature on defaulting debtors in general, but there is a major shortcoming when it comes to critical defaulting debtors. Design/methodology/approach The authors used binomial logistic analysis to study a population of over one million subjects with defaulting debts in Costa Rica, as recorded in the databases of the Equifax bureau. Findings The authors identify the variables that most strongly explain the possibility of a defaulting debtor being in a critical state, namely, commercial lending activity, number of delinquent loans in different commercial activities, gender and place of residence. Research limitations/implications The main limitations of the study include the use of relatively non-diverse data to capture the complexity of critical default. For example, the socio-demographic characteristics of the debtor, such as income, profession and education, credit details such as interest rates and the duration of relationship; psychological factors and unexpected events could help to provide a more nuanced understanding of the phenomenon. Although quantitative data offers a general overview of critical defaulting debtors and their types of debt, more in-depth inquiry is needed into the reasons why these debtors have stretched their operations to such critical limits. Practical implications It seems reasonable to consider that institutions in the non-banking credit sector need to adopt risk management tools from the banking sector. This approach presents an opportunity to strike a winning balance between a relational lending approach and a more structured method, ultimately boosting portfolio sustainability. From a Costa Rican national perspective, the findings of this research could guide the efforts of public and private institutions in the field of consumer financial education. Furthermore, it is worth highlighting the importance of promoting the exchange of information between the banking and non-banking financial system. Originality/value The findings are useful for decision-makers in the financial system, especially because they offer information for the first time on critical defaulting debtors in the non-banking credit sector. Objetivo Esta investigación identifica el perfil de deudores críticos en mora (no recuperables o en cobranza judicial) en el sector de crédito no bancario. Cabe destacar que existe una abundante literatura sobre deudores en mora en general, pero hay una gran falta de información sobre los deudores críticos. Metodología Utilizamos análisis logístico binomial para estudiar una población de más de un millón de sujetos con deudas en mora en Costa Rica, según lo registrado en las bases de datos del bureau Equifax. Resultados Identificamos las variables que explican con mayor fuerza la posibilidad de que un deudor en mora se encuentre en estado crítico, entre ellas la actividad de préstamos comerciales, el número de préstamos morosos en diferentes actividades comerciales, el género y el lugar de residencia. Originalidad/valor Los hallazgos son útiles para los tomadores de decisiones en el sistema financiero, especialmente porque ofrecen información por primera vez sobre deudores críticos en el sector de crédito no bancario. Objetivo Esta pesquisa identifica o perfil dos devedores críticos em mora (não recuperáveis ou em cobrança judicial) no setor de crédito não bancário. Cabe destacar que existe uma abundante literatura sobre devedores em mora em geral, mas há uma significativa falta de informações sobre devedores críticos. Metodologia Utilizamos análise logística binomial para estudar uma população de mais de um milhão de indivíduos com dívidas em mora na Costa Rica, conforme registrado nas bases de dados do bureau Equifax. Resultados Identificamos as variáveis que explicam mais fortemente a possibilidade de que um devedor em mora se encontre em estado crítico. Entre essas variáveis destacam-se a atividade de empréstimos comerciais, o número de empréstimos inadimplentes em diferentes atividades comerciais, o gênero e o local de residência. Originalidade Os achados são úteis para os tomadores de decisão no sistema financeiro, especialmente porque oferecem informações pela primeira vez sobre devedores críticos no setor de crédito não bancário.