Borrower reputation is important in assessing credit quality because

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Preservation of a good customer/FI relationship acts as an additional incentive to encourage loan repayment. A good borrower reputation indicates that the borrower has a history of meeting financial obligations and is likely to continue doing so in the future. This improves the borrower's creditworthiness and makes them a preferred borrower for financial institutions. Additionally, a good customer/FI relationship increases the likelihood of repeat business and referrals, which is beneficial for both parties.

Borrower Reputation Is Important in Assessing Credit Quality Because