Does Borrower’s Personality Affects the Repayment of the Loan? A Study of Banking Sector of Pakistan

  • Shahzadah Fahed Qureshi Institute of Social Sciences,Bahauddin Zakariya Univeristy, Multan, Pakistan
  • Rashid Ahmad M.Phil Scholar (Public Administration), Bahauddin Zakariya Univeristy, Multan, Pakistan
  • Muhammad Saim Hashmi Mirpur University of Science and Technology (MUST), Azad Jammu and Kashmir, Pakistan
Keywords: Loan Repayment, Personality Traits, Regular Borrower, Defaulter


The continuing global increase in economic activities is increasing the importance of the banking sector as the hub of such activities. The banking sector issue loans to individuals, firms, and government. Various factors influence the repayment of these loans. In this study, we argue that the personality of the borrower affects the repayment of the loan. We have selected a sample of 500 borrowers of five major banks in Pakistan by using a cluster sampling technique. We selected 250 (50%) regular borrower and 250 (50%) defaulters. We measured borrower personality through a 44-items big five inventory (BFI) questionnaire similar to John & Srivastava (1999). We analyzed data using one-way ANOVA and regression. The results show considerable significant differences between the personality of regular borrowers and defaulters on all five traits of personality, which reveals that the borrower’s personality affects the repayment of the loan. The defaulters were high on extroversion and neuroticism dimensions, while regular borrowers were high on agreeableness, conscientiousness, and openness to experience. The results also depict the strong effect of demographic characteristics such as income, education, and family size on loan repayment. The study suggests banks consider the personality traits of the borrower at the time of issuing of loan.


Download data is not yet available.

Article Analytics Summary


Abreham, G. (2002). Loan Repayment And Its Determinants In Small Scale Enterprises Financing In Ethiopia: Case Of Private Borrowers Around Zeway Area. Aau.

Bertrand, M., & Morse, A. (2011). Information Disclosure, Cognitive Biases, And Payday Borrowing. The Journal Of Finance, 66(6), 1865-1893. DOI:

Chapman, J. M. (1940). Factors Affecting Credit Risk In Personal Lending Commercial Banks And Consumer Instalment Credit (Pp. 109-139): NBER.

Cobb-Clark, D. A., & Schurer, S. (2012). The Stability Of Big-Five Personality Traits. Economics Letters, 115(1), 11-15. DOI:

Cole, S., Kanz, M., & Klapper, L. (2015). Incentivizing Calculated Risk‐Taking: Evidence From An Experiment With Commercial Bank Loan Officers. The Journal Of Finance, 70(2), 537-575. DOI:

Feschijan, D. (2008). Analysis Of The Creditworthiness Of Bank Loan Applicants. Journal Economics And Organization, 5(3), 273-280.

Haile, F. (2015). Determinants Of Loan Repayment Performance: Case Study Of Harari Microfinance Institutions. Journal Of Agricultural Extension And Rural Development, 7(2), 56-64. DOI:

Haq, M. F., Akmal, M., Shafique, B., Abbasi, M. U., & Chaudhry, M. S. (2009). Towards Achieving Social And Financial Sustainability: A Study On The Performance Of Microfinance In Pakistan. International Labor Organization; State Bank Of Pakistan, 7.

Hollingworth, H. (1938). Review Of Personality: A Psychological Interpretation. DOI:

Hunt, K. H. M., & Wilson, T. (2016). The Impact Of Borrower Characteristics On The Effectiveness Of Small Loan Regulation. DOI:

Hussain, T., Aslam, Z., Aslam, S., Latif, M., & Ahmad, S. Credit Risk Management Practices Used By Banks In Agricultural Finance: A Case Study Of Pakistan.

John, O. P., &Srivastava, S. (1999). The Big Five Trait Taxonomy: History, Measurement, And Theoretical Perspectives. Handbook Of Personality: Theory And Research, 2(1999), 102-138.

Khandker, S. R., & Faruqee, R. R. (2003). The Impact Of Farm Credit In Pakistan. Agricultural Economics, 28(3), 197-213. DOI:

Kibrom, T. G. (2010). Determinants Of Successful Loan Repayment Performance Of Private Borrowers In Development Bank Of Ethiopia North Region. Mekelle University.

Kim, H., & Devaney, S. A. (2001). The Determinants Of Outstanding Balances Among Credit Card Revolvers. Journal Of Financial Counseling And Planning, 12(1), 67.

Makorere, R. F. (2014). Factors Affecting Loan Repayment Behaviour In Tanzania: Empirical Evidence From Dar Es Salaam And Morogoro Regions. International Journal Of Development And Sustainability, 3(3), 481-492.

Mccrae, R. R., & John, O. P. (1992). An Introduction To The Five‐Factor Model And Its Applications. Journal Of Personality, 60(2), 175-215. DOI:

Munene, H. N., & Guyo, S. H. (2013). Factors Influencing Loan Repayment Default In Micro-Finance Institutions: The Experience Of Imenti North District, Kenya. International Journal Of Applied, 3(3).

Murray, H. A. (1938). Explorations In Personality.

Nyhus, E. K., & Webley, P. (2001). The Role Of Personality In Household Saving And Borrowing Behaviour. European Journal Of Personality, 15(S1), S85-S103. DOI:


Petersen, M. A. (1999). Banks And The Role Of Lending Relationships: Evidence From The US Experience. Rassegna Economica, 63(1), 37-61.

Rauf, S. A., & Mahmood, T. (2009). Growth And Performance Of Microfinance In Pakistan. Pakistan Economic And Social Review, 99-122.

Rustichini, A., Deyoung, C. G., Anderson, J. C., & Burks, S. V. (2012). Toward The Integration Of Personality Theory And Decision Theory In The Explanation Of Economic And Health Behavior. DOI:

How to Cite
Shahzadah Fahed Qureshi, Rashid Ahmad, & Muhammad Saim Hashmi. (2020). Does Borrower’s Personality Affects the Repayment of the Loan? A Study of Banking Sector of Pakistan. Journal of Accounting and Finance in Emerging Economies, 6(1), 107-116.