Determining the Probability of Default and Risk-Rating Class for Loans in the Seventh Farm Credit District Portfolio

Credit risk is the primary risk facing financial institutions. With the proposed guidelines under the New Basel Accord, financial institutions will benefit from better assessing their risks. The probability of default (PD) and risk-rating class is studied for 157,853 loans in the Seventh Farm Credit District Portfolio. Repayment capacity, owner equity, and working capital origination loans are important determinants of the PD. Standard & Poor's (S&P) reported probabilities of default were used to classify each of the loans into a risk-rating class. The average predicted PD is 1.61%, which would fall into the BB− S&P class.     

论新巴塞尔协议下中国银行业资产证券化的构建与完善

在新巴塞尔协议的压力下,中国银行业需要构建和完善资产证券化的机制以提高资本充足率。根据新巴塞尔协议规定的要求,指出该机制存在的问题,并提出了对策建议。     

Assessing Credit Risk in an Agricultural Loan Portfolio

We show that agricultural lenders can implement a credit risk model that uses their loan portfolio data and complies with the new Basel Capital Accord without requiring Merton-type model assumptions about underlying asset price volatility. A credit risk model is described and calibrated to the loan portfolio of a farm lender. The model is used to produce plausible estimates of expected loss, unexpected loss, and credit value-at-risk (VaR) at the portfolio and subportfolio (sector) levels. The lender could use these kinds of estimates to meet regulatory requirements or to adjust the level of capital in response to changing economic conditions.
Nous montrons que les prêteurs agricoles peuvent appliquer un modèle de risque de crédit qui permet d'utiliser des données tirées de leur portefeuille de prêts et qui respecte le nouvel accord de Bâle sur les fonds propres, sans qu'il soit nécessaire d'utiliser les hypothèses du modèle de Merton sur la volatilité des prix des actifs. Nous avons décrit un modèle de risque de crédit et l'avons calibré en fonction du portefeuille de prêts d'un prêteur agricole. Le modèle est utilisé pour effectuer des estimations plausibles quant aux pertes prévues, aux pertes imprévues et à la valeur à risque au niveau du portefeuille et du sous-portefeuille. Le prêteur pourrait utiliser ce genre d'estimations pour respecter les exigences réglementaires ou pour rajuster le niveau de fonds propres en fonction de l'évolution de la conjoncture économique.     

Why Don't Lenders Finance High-Return Technological Change in Developing-Country Agriculture?

Most of the literature attributes credit constraints in small-farm developing-country agriculture to the variability of returns to investment in this sector. But the literature does not fully explain lenders' reluctance to finance investments in technologies that provide both higher average and less variable returns. This article develops an information-theoretic credit market model with endogenous technology choice. The model demonstrates that lenders may refuse to finance any investment in a riskless high-return technology–regardless of the interest rate they are offered–when they are imperfectly informed about loan applicants' time preferences and, therefore, about their propensities to default intentionally in order to finance current consumption.     

Risk, Wealth, and Sectoral Choice in Rural Credit Markets

We model the role of the informal credit sector in developing countries. The informational advantage of informal lenders is portrayed as the ability to monitor borrowers. Monitoring reduces the incentive problem and allows for contracts with lower collateral. This enables informal lenders to serve both individuals who cannot post the collateral required by the formal sector and those who are able but do not want to post collateral. The model is consistent with the conventional view of the informal sector as recipient of spillover demand from the formal sector. It also shows that the informal sector may provide partial insurance as the lower collateral requirement implies greater consumption smoothing for borrowers.     

The impact of farm credit in Pakistan

Both informal and formal loans matter in agriculture. However, formal lenders provide many more production loans than informal lenders, often at a cost (mostly loan default cost) higher than what they can recover. For example, the Agricultural Development Bank of Pakistan (ADBP), providing about 90% of formal loans in rural areas, incurs high loan default costs. Yet, like other governments, the Government of Pakistan supports the formal scheme on the grounds that lending to agriculture is a high risk activity because of covariate risk. Hence, such policies are often based on a market failure argument. As farm credit schemes are subsidised, policy makers must know if these schemes are worth supporting. Using a recent large household survey data from rural Pakistan (Rural Financial Market Studies or RFMS), we have attempted to estimate the effectiveness of the ADBP as a credit delivery institution. A two‐stage method that takes the endogeneity of borrowing into account is used to estimate credit impact. Results reveal that ADBP contributes to household welfare and that its impact is higher for smallholders than for large holders. Nevertheless, large holders receive the bulk of ADBP finance. The ADBP is, thus, not a cost‐effective institution in delivering rural finance. Its cost‐effectiveness can be improved by reducing its loan default cost and partially by targeting smallholders in agriculture where credit yields better results.     

新疆农业资金投入与农民收入效应关系的实证研究

[目的]为清晰识别农业资金投入对新疆农民收入的影响程度,并给予地方政府进一步优化调整农业资金使用效能提供参考依据。[方法]文章选取1978~2013年新疆统计数据,采用协整分析、误差修正模型等方法对财政支农、农业贷款、农民自主投资与新疆农民人均纯收入进行了实证探究。[结果]新疆地区财政支农、农业信贷、农民自主投资与农民人均纯收入之间存在长期均衡关系;而短期内财政支农、农业信贷以及农户自主投资的促进效应不如长期明显,其中农业贷款的收入效应远低于财政支农和农民自主投资;财政支农、农民自主投资与农民人均纯收入在短期内具有格兰杰因果关系,长期则格兰杰因果关系解释力逐渐减弱,而农业贷款在短期内不是新疆农民人均纯收入增长的格兰杰原因,长期则互为格兰杰因果关系。[结论]该文提出加大财政支农投入力度,提高财政资金配置效率;推动农村金融改革,提高农村金融效率;提振农民自主积累资金投资的积极性等政策含义,以期为新疆"三农问题"有效解决提供坚实可靠的资本基础。     

Changing Agricultural Comparative Advantage

Special circumstances in the agricultural sector have limited the use of comparative advantage in addressing the planner's dilemma of allocating investment between industry and agriculture and in examining the doctrine of food self-sufficiency. A three-factor model of agricultural trade, extending earlier models, is used to address some of these special circumstances and to formulate a theory of agricultural comparative advantage under changing economic conditions. Emphasis is placed on the short-run fixity of sector-specific capital stocks, the role of qualitative differences in land (natural resource) endowments, and on non-homothetic preferences. In addition to insights on agricultural comparative advantage, implications for project evaluation are considered.     

The Long-Terra Credit Agency Perspective

Agriculture is at a crossroads in terms of how it will be financed. Debt capital as a source of capital to establish farmers will become less important as lenders become more conservative and base their ioan decisions more on real repayment capacity. Very serious questions have to be asked about the relevance of many provincial and federal lending programs for the coming years. A rethinking of the role of government in farm credit is now under way and will continue in the future.
New programs must be developed for the farmers of the future which will allow them to become and remain established in a low or deflationary environment.     

Sustainable Agriculture – Life beyond Subsidies: Lessons from New Zealand

This address explores the importance for agricultural sustainability of different types of capital assets, especially knowledge capital, drawing on recent research in New Zealand that has aimed to expand the contribution of the primary sector to sustainable wellbeing. I begin with an overview of the theory on what constitutes sustainability and wellbeing, focusing on connections between wellbeing, capabilities and different types of capital stocks, and highlighting the importance of knowledge capital for wellbeing. Recent trends in New Zealand and United Kingdom agriculture provide the applied context for analysis of some key knowledge issues facing agriculture, framed by the capability theory of the firm following David Teece. The paper finishes with a brief conclusion on the implications for the UK.     

从西方农民弱势地位谈我国新型职业农民培育

新型职业农民是促进农业农村发展的重要人力资本。文章基于西方发达国家的经验教训,立足我国基本国情,提出在培育新型职业农民的过程中,应当对农业资本和技术重组带来的规律性问题加以防范,发挥我国农村经营制度的优势,增强基层政府的农业社会服务功能,在培育新型职业农民中实现乡村振兴。     

Heterogeneous Demand and Supply for an Insurance‐linked Credit Product in Kenya: A Stated Choice Experiment Approach

We employ a discrete choice experiment to elicit demand and supply side preferences for insurance‐linked credit, a promising market‐based tool for managing agricultural weather risks and providing access to credit for farmers. We estimate preference heterogeneity using primary data from smallholder farmers and managers of lenders/insurers combined with household socio‐economic survey data in Kenya. We analyse the choice data using maximum simulated likelihood and Hierarchical Bayes estimation of a mixed logit model. Although there are some similarities, we find that there is conflicting demand and supply side preferences for credit terms, collateral requirements, and loan use flexibility. We also analyse willingness to buy and willingness to offer for farmers and suppliers, respectively, for the risk premium for different attributes and their levels. Identifying the preferred attributes and levels for both farmers and financial institutions can guide optimal packaging of insurance and credit providing market participation and adoption motivation for insurance‐bundled credit product.     

Collateral,Guaranties and Rural Credit in Developing Countries: Evidence from Asia

The paper reviews the theory of the impact of loan collateral, and in particular land collateral, in institutional and non-institutional rural credit markets. Evidence from three Asian developing countries is presented, showing extensive use of land collateral among institutional lenders in countries where such collateral is legal. The use of land collateral is more common than other forms of security, except in places where legal inhibitions on mortgaging agricultural land exist. Non-institutional lenders are less inclined to use land collateral. However, lenders who do not have links to borrowers in matters other than finance are more likely to use loan securities. Estimates of instutional credit supply and demand in rural Thailand confirm that the pledging of land collateral affects the supply of credit more than group guaranty. It is also shown that larger farmers are more likely to utilize land collateral. The conclusion is that land collateral is preferred by instutional lenders as it reduces creditworthiness assessment costs. Attempts to ban or limit collateral use by decree are motivated by equity considerations, but they will cause loss of efficiency. Simplification of ownership verification and other policies reducing the transaction cost of collateral pledging will mitigate the negative equity implications of collateral.     

中国农业资源错配的测算、时空演变特征及影响因素分析

目的 探究中国农业生产要素错配的时空演变特征及其影响因素,为改善要素空间错配,提高农业生产效率提供相关参考和政策建议。方法 文章以资源错配理论为基础构建农业资源错配指数测算框架,选取2000—2019年中国30个省（市、自治区,不含港澳台和西藏）的经济数据测算出农业资本错配指数、劳动力错配指数、土地错配指数以及相关影响因素指标,采用空间计量模型分析其对农业资源错配的影响。结果 （1）农业资本错配、劳动力错配和土地错配在时空上分别展现出不同的演变发展特征,但都呈现出要素错配不断改善的趋势。（2）从实证结果来看,农业经营规模的提高能够显著改善农业资本错配和土地错配,农业种植结构升级能够有效改善农业劳动力错配和土地错配,政府的宏观调控能够有效改善农业资本错配,同时提高农村金融发展水平是改善农业资本错配一种重要方式。（3）区域经济发展水平提高能够通过促进农业生产要素重新组合来改善农业资本错配和劳动力错配,城镇化发展水平提高能够改善劳动力错配和土地错配。结论 中国农业生产要素在不同区域的错配程度在不断改善,农业经营规模、种植结构和经济发展水平是影响要素错配的关键因素,消除要素流动障碍,完善区域联动机制是改善要素错配的重要方式。     

The Costs and Returns of Agricultural Credit Delivery

Borrower-level data from 963 agricultural lending relationships are used to examine how several factors influence the costs and returns of extending agricultural credit. The results provide estimates of the costs and returns of agricultural lending and the extent to which these costs and returns are influenced by factors such as loan volume, lender/borrower relationship factors, and contract terms. The findings indicate that economies of size exist in agricultural credit delivery and that lenders pass most of these benefits on to borrowers through lower interest rates. In addition, the impacts of lender/borrower relationship factors were relatively small.     

AGRICULTURE IN THE URUGUAY ROUND: FROM THE PUNTA DEL ESTE DECLARATION TO THE GENEVA ACCORD

This paper traces the progress of the agricultural negotiations in the current GATT round from the Ministerial Declaration at Punte del Este, Uruguay, in September 1986 to the Geneva ‘Accord’ in April 1989. It summarises the initial position papers of the major participants, discusses the impasse at the Mid-Term Review (Montreal, December 1988) and relates the Geneva Accord to the groundwork laid down in the preceding negotiations. Finally, the paper comments on some of the implications of the accord and on the prospects for a successful conclusion for the negotiations.     

Measuring Excess Capital Capacity in Agricultural Production

We introduce the concept "excess capital capacity" and employ a stochastic input requirement frontier to measure excess capital capacity in agricultural production. We also propose a two-step estimation method that allows endogenous regressors in stochastic frontier models. The first step uses generalized method of moments to get consistent estimates of the frontier parameters in the presence of endogenous regressors. The second step uses maximum likelihood to measure excess capital capacity and evaluate the factors that influence it. The empirical application to Dutch cash crop farms found varying degrees of excess capital capacity. The policy implications of excess capital capacity are discussed.     

Farm Capital Investment and Deviations from the Optimal Path

We identify farms’ optimal investment path in capital assets and compare it with their actual investment to assess the direction and extent of deviation from the optimal investment. A probit model is further used to investigate the determinants of the probability that a farmer over‐ or under‐invests in capital assets. We use a panel dataset of Dutch dairy farms over the period 2003–2013, and find that most farms under‐invest in capital assets during the study period. Although the number of farms that had over‐invested in capital assets is relatively small, these farms account for the biggest share of total investment in capital assets. The probit results show that liquidity, agricultural support payments, age, land tenure and standard output size are important variables explaining the likelihood of over‐and under‐investment.     

Financial Reporting in Agriculture: In Need of A Reliable System

Farm managers and lenders are becoming increasingly aware of the need for thorough and accurate farm financial management.1 The current extended agricultural recession magnifies this need. Increased current loan losses and the increasing financial stress of farm operators have prompted lending institutions, government agencies and farmers to determine what has gone wrong in the area of farm financial management and, more importantly, to search out ways to reduce the frequency of farm business failure. The use of inadequate financial reporting systems is viewed as one source of the problem.     

农地流转对农业资本深化的实证研究

[目的]现阶段我国农业生产要素配置不合理、资源浪费现象严重、农业部门的整体效益较低。农地流转的过程既是农地资源重新配置与再利用,又是促进农业资本深化的重要方式。通过制定合理有效地农地流转制度来高效配置资本要素,从而实现农业的可持续发展。[方法]基于农地流转的规模效应和配置效应两个维度来分析农地流转对农业资本深化的影响,利用固定效应模型进行多元回归,分别求农地流转对两个核心指标的影响大小。[结果]农地流转对农业资本增密和滞后一期的农业资本配置效率具有正向促进关系。农地流转促进了农业现代化技术的推广与运用,加速了农业生产资料在单位面积土地上的运作效率,农地流转促进了农业资本的持续深化。[结论]加快农地合理规范流转是提高农业资本深化的重要途径。