Factors influencing the Demande on Consumer Loans in Morroco

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Therefore the dependent variable cited in this article is the debtor credit rate that we will analyze in our report. In that article they concluded , using ultiple regression method that there are a positive relation between the preferential interest rate and the loans portfolio. Which means that the more the interest is lower the more the loan portfolio, using the preferential rate, is bigger. In other words, according to this article we can say that an increase of the use of preferential rates increases the number of loans distributed. However, also according to the same article, some other variables that could not been included in the empirical study could influence the size of the loan portfolio like the maturity of the loan, the segment targeted by the FI’s, as well as the maximum maturity of the loan. The validity of this theory, according to this article, could also be based on the fact that the legal cost of the loans are not the one used by the FI’s and also by the rising competition between these entities. Therefore the demand on loans is elastic towards the cost of the loan (Pricing Policies on Consumer Loans at Commercial Banks , Paul F. Smith , The Journal of Finance, Vol. 25, No. 2, 1969 (May, 1970), pp. 517-525)

According to the article Household Demand for Policy Loans the policy on demand on loans is affected by household saving, household capital gain, consumer purchases, housing purchases, a financial

disintermediation variable related to the commercial paper, and a nonfinancial disintermediation variable related to the home mortgage rate. This study aims to evaluate the importance of financial and nonfinancial disintermediation. Finally, the results showed that first the demand on policy loans is a stable function; and the nonfinancial disintermediation had a bigger impact on the policy of loan demand (Household Demand for Policy Loans , A. Edward Day and Patric H. Hendershott , The Journal of Risk and Insurance, Vol. 44, No. 3 (Sep., 1977), pp. 411-423)

The third article is about a study that tries to examine the lending activities of commercial banks under various degrees of credit inflexibility, but under similar conditions of demand; and it also compares the responsiveness of consumer lending to that of other types of loans and investments. This study concluded that banks that must restrict credit limited their loans to consumers as well as other investment and loans. Also, we understand that banks were receptive to market pressures and that strong market demands tended to be served ( Response of Consumer Loans to General Credit Conditions Author(s): Paul Smith Source: The American Economic Review, Vol. 48, No. 4 (Sep.,1958), pp. 649-655).

The aim of the research paper Factors Affecting Customers’ Decision for Taking out Bank Loans is to identify the different factors that affect the consumers’ decision on whether or not to take out a loan from a particular loan. So many variables such as service quality, satisfaction, and demographics have been analyzed and considered as potential factors that influence customers in taking out a loan from commercial banks or not. Results showed that when the interest rate is low, the cost of a loan decreases, which increases the demand for bank loans. Then, factors concerning service quality and social factors seem to affect a lot the decision to take out a loan. Finally, they also noticed that households with high incomes are the typical profile to demand a loan (Factors Affecting Customers’ Decision for Taking out Bank Loans: A Case of Greek Customers, Christos C. Frangos, Konstantinos C. Fragkos, et.al).

Then, the article Estimating Credit Demand in Croatia was made to know the credit interest utilizing the ordinary least squares method; they expressed that the fundamental components that influence the credit interest rate are the real investment rate and the change in the real GDP. They attempted to incorporate other variables in this study yet they were considered as trend variables, for example the inflation and the nominal interest rate (Estimating Credit Demand in Croatia, Katja Gattin-Turkalj, Igor Ljubaj, Ana Martinis, Marko Mrkalj, Zagreb, April 2007)

Another study took the example of automobiles. In fact, it deals with the change in the price of automobiles and the interest rates on automobile loans. So, it explores the distinction in customers’ reactions to change in price and change in the interest rate loans. Since lower interest rates for loans are basically equivalent to a decrease in price, buyers ought to respond just as to lower prices and interest rates on loans, holding all other different elements demand steady(ARE CONSUMERS MORE INTERESTED IN FINANCING INCENTIVES OR PRICE REDUCTIONS? E. Catesby Beck, Mary Washington College).

The article Credit, Money, and Aggregate Demand deals with the standard models of aggregate demand treat money and credit asymmetrically. It states that money has a special status, whereas loans, bonds and other debt instruments are grouped in a bond market. Loans, because of their finance activities that cannot be financed in the bond market, acquire a special status. If financial intermediation is reduced, by price or by rationing, aggregate demand and supply may be affected. Moreover, it states that the instability of econometric money demand equations, which may be a product of deregulation and innovation by financial intermediaries, reduced the utility of money as a guide to central bank policy. This paper concludes that a more symmetric treatment of money and credit is feasible (Credit, Money, and Aggregate Demand, Ben S. Bernanke Alan S. Blinder, March198).

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Model specification

The literature review helped us estimate the estimated equation for the demand on consumer loans. The factors that we think influence the demand on consumer loans are the consumer price index, the interest rate, the aggregate consumer expenditure. The equation is as follows:

(Consumer Loans Demand) t = α0 + α1 (Consumer Price Index) t + α2 (Interest Rate) t + α3 (Savings) + e t

Loan demand by consumer:

The consumer loan demand t indicates the total sum of the loans approved to consumer by banks in millions MAD in year t. We picked the consumer demand on loans as the dependent variable. It demonstrates the aggregate sum of consumer loans given by money related organization (financial institutions) especially banks in particular year t and in million MAD. The amount of loans that are given to customers changes consistently relying upon numerous criteria beginning from the economic stability to the condition of income per capita.