Determinants of Loan Approval in Banks: An Empirical Study of Borrower Profiles and Banking Practices

Abstract Loan approval is a critical function for financial institutions, balancing business growth with risk management. The decision to approve or reject a loan is influenced by multiple factors including the borrower’s income, employment status, credit history, collateral, and loan amount. This study examines the determinants of loan approval in commercial banks through an empirical analysis of borrower profiles and banking practices. Data were collected from a sample of 200 loan applicants and analyzed using statistical tools such as correlation analysis, regression analysis, and chi-square tests. The findings indicate that income level, credit history, and repayment capacity significantly affect loan approval decisions, while demographic factors like age and marital status have limited impact. The study provides insights for banks to enhance their loan evaluation processes and minimize default risks.