Analysing credit risk in persons with disabilities as an instrument of financial inclusion

Abstract

In many countries, the full financial inclusion of persons with disabilities remains to be achieved. Although researchers and international organisations observed that financial inclusion would be facilitated by analysis of solvency, the causes of default risk among this population have yet to be established. Our study, applied to loans made by a Spanish bank to 785 persons with disabilities, identifies several factors relevant to the default risk of this population. The findings show that the purpose of the loan, the borrower’s degree of liquidity and financial leverage, economic context of GDP and risk premium all influence the probability of default of persons with disabilities. These risk factors have a similar impact to that observed in persons without disabilities. Our conclusions can be interesting in the negotiation of bank loans for persons with disabilities and also for bank managers, politicians, government managers, international organisations and other stakeholders concerned about financial inclusion. For developing countries our findings can have a high favourable impact on the financial inclusion of these people, due to their high number in these countries. Furthermore, our conclusions raise the usefulness of adopting political measures such as tax advantages or regulation of specific criteria to evaluate the default risk of these people.