Borrower reputation is important in assessing credit quality because
A. good past payment performance perfectly predicts future behavior.
B. preservation of a good customer/FI relationship acts as an additional incentive to encourage loan repayment.
C. FIs only lend to customers they know.
D. customers with poor credit histories always default on their loans.
E. a reputation for honesty is important in credit appraisal.
Ans: B. preservation of a good customer/FI relationship acts as an additional incentive to encourage loan repayment.
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