The role and importance of customer's financial information in making credit decision: The case study in Yemeni banks

Credit analysis play an important role in the assessment of the customer's credit worthiness. The importance of this study comes from the importance of banking industry as one of the most essential contemporary economic industries. The main objective of this study was to examine the role of customer's financial information in credit analysis and rationalization credit decisions in banking operating in Yemen (OBY). To achieve the research objective, a questionnaire is distributed to 105 respondents who work in credit departments in 13 operating banks in Yemen. Statistical Package for Social Sciences (SPSS-19) was used to perform descriptive analysis and inferential statistics methods which were adopted to test whether the research hypotheses can be accepted or rejected. The results exhibited that the credit officers tend to use of variety of sources of information and do not rely only on financial information provided by customers to make credit decisions. Among the various techniques of credit analysis, the financial ratios analysis can be considered as the most widely used in banks operating in Yemen to forecast the customer's performance. Additionally, credit officers considered the customer's revenue capacity is extensively used in credit decisions. Whereas they considered the customer's cash flow activities are less used to make credit decisions in OBY. Furthermore, the findings also showed that participants perceive themselves to suffer from significant difficulty in understanding and analysis of financial information therefore, they need to increase their skills and abilities through continuous training and rehabilitation. Finally, the results reported that there is no significant difference between the opinions of the participants based on all demographic factors and using of financial information in credit decisions, except the functional level variable and using of the information related to customer's cash flow section. Key Words: Financial ratios, Revenues Capacity, Cash Flows, Analysis of Credit Applications, Yemen Banking Sector.