Abstract

Abstract Purpose: This study investigates the effects of borrower-specific characteristics such as education, occupation, employment duration, and socioeconomic status on default risk in a public sector bank in Pakistan. The study also assesses the effectiveness of the Consumer Risk Rating (CRR) system in predicting customer defaults. Design/Methodology/Approach: The research is quantitative in nature and is applied to a case study of 100 cases drawn from 2,076 consumer financing accounts in a public-sector bank. Descriptive statistics, correlation analysis, linear regression, and probit models were used for data analysis.

Keywords

Islamic banking, Credit risk, Consumer Portfolio, Default Risk, Socio-economic factors, ShariahCompliant financing.