Identification of Factors Affecting Agricultural Credits Repayment in Maragheh County: An Application of Ordered Logit Model

Document Type : Research Paper

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Abstract

One of the important problems concerning the lending loans is the probability to nonpayment by borrowers. Several factors could be involved in this field which is necessary in order to control and reduce the existing risk. These factors should be identified and strategies for improving the delayed facilities implemented. This study aimed to examine factors affecting improvement of repayment in Agricultural Bank in the city of Maragheh in East Azarbaijan province of Iran. The required data were obtained by examining a sample of 779 individual farmers who had received credits from Agricultural Bank in Maragheh city during the period 2004-2008. Ordered Logit Model was utilized for analyzing the data. Results showed that having an activity besides farming, extending the repayment of loan and high amount of received loan are the factors that have negative and significant impacts on loan repayment. While, factors including high number of installments and long intervals for repayment increase significantly the probability of loan repayment. Therefore, it is suggested that agricultural banks use optimum intervals for repayment and not to extend the due for repayments in order to improve the probability of loan repayments.

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References

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Iranian Journal of Agricultural Economics and Development Research
Volume 47, Issue 1
April 2016
Pages 47-55

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