Impact of Credit Risk in Farm Planning in the Chiang Mai Valley, Thailand: A Multiperiod Risk-Programming Analysis of Credit Reserves
Theoretical model indicates that credit risk affects farmers 'debt use and, thus, firm organization. An empirical model is set up to test the hypothesis from the theoretical model. The purpose of this study is to examine how credit availability to individual farmers, as evaluated by their l...
| Príomhchruthaitheoir: | |
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| Formáid: | Tráchtas |
| Teanga: | English English |
| Foilsithe / Cruthaithe: |
1993
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| Ábhair: | |
| Rochtain ar líne: | http://psasir.upm.edu.my/id/eprint/8040/1/FEP_1993_1_A.pdf |
| Achoimre: | Theoretical model indicates that credit risk affects
farmers 'debt use and, thus, firm organization. An empirical
model is set up to test the hypothesis from the theoretical
model. The purpose of this study is to examine how credit
availability to individual farmers, as evaluated by their lenders, responds to changes in past levels of farm income.
Effects of resulting credit risks on optimal farm portfolios,
including credit reserves,are then evaluated with different
degree of risk aversion coefficients.
The data used in this study were obtained from both
primary and secondary sources. The historical data series of farmers' in come and supply of credit were elicited from
individual borrower record keeping and approved loan request
form. Five lenders and 259 borrowers were selected as the
sample of the study. Farmers were classified in to the following
six groups : severe loss, moderate loss, average conditions,
moderate gain, and favourable gain, based on their farm income
experienced by the farmer in the preceding year. Thus, the
likelihoods associated with the gain and loss conditions are
derived with farm income risk parameters used in this study.
Results of two-way analysis of variance, where farm income
risk were treated as treatments and lenders were treated
blocks, indicated that (i) credit appears to be linearly
related to past farm income, at the five percent level of
significance, (ii) capital credit has a higher variability than
operating credit, and (iii) capital credit is more sensitive to
change in past farm income than operating credit. These results
are consistent with the hypothesis that farmers' credit is
positively correlated with changes in level of farm income,
although the correlation appears stronger for capital credit
than for operating credit. That is, risks associated with
credit availability for capital purchases appears to add more
to farmers' total portfolio risk than does credit for
operating. |
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