Credit Risk Of Mortgage For Small Agricultural Enterprises

In the background of the government providing agricultural financial supports, thefinancing problem of agricultural enterprises, especially small ones, still affects theirdevelopment deeply. On the one hand, government requires banks to take social responsibility,increase agricultural financial supports, and offer loans to small agricultural enterprises. Onthe other hand, because of high management risk and lack of collateral, credit risk keeps high.As the main loan pattern for small enterprises, due to the particularity of mortgage property,mortgage increases credit risk. So the study on credit risk of mortgage for small agriculturalenterprises helps banks choose objects, provides effective control to credit risk, supports theenterprise’s development, and also helps enterprises solve capital needs problem. Thedomestic study mainly focuses on the capital needs and its solution in the point of agriculturalenterprises, and lacks the study on credit risk in the perspective of banks. Foreign literaturehas little research on Chinese loan problem for small agricultural enterprises. Therefore, thestudy on the credit risk of agricultural loan in the perspective of bank has practical meaning.This article has four parts: the first part includes chapter one and two, which introducesresearch background, purpose, meaning, content, method, and summarizes domestic andforeign research, and defines the basic concepts. The second part includes chapter three andfour, based on the analysis of the mortgage background, identifies and measures credit risk,and uses the Logit model and Fisher linear discriminant model for empirical research, provesthe influence factors of credit risk and its reasons, and analyzes the model prediction accuracy.The third part is chapter five, combines case study with model, injects the macroeconomicfactors and agricultural enterprise basic information score, and remedies the low modelprediction accuracy. The fourth part is chapter six, aimed at the result of model analysis andcase study, puts forward risk prevention advices from the bank and the government.The main conclusions of this paper are as follows:(1) The factors which affect the credit risk of mortgage for small agricultural enterprisescan be divided into enterprise, house and mortgage. In the Logit model, pti(pay to incomeratio) and other mortgage assets, profitability, registered capital, default history, leader’seducation background have positive relationship with loan defaults; number of cooperation with banks, house value have negative relationship with loan default. Among them, theregistered capital is in the form of square root in the model, and its impact on loan default isnot linear. Although other variables, such as interest rate, business time, are not significant inthe model, they have impact on credit risk as the descriptive statistical analysis shows.(2) Cooperation with banks variable is one of the important variables that affects creditrisk, and concides with the characteristics of small enterprises. Due to small production scale,weak market competitiveness, poor operating stability, low profits, it is difficult for smallenterprises to get loan from banks. However, if small enterprises can have good relationshipwith banks, it can increase the banks’ trust to enterprises, decrease the difficulty of enterprisesto get the timely, convenient and preferential loans. At the same time, for the bank, it canreduce the credit risk for agricultural loans, and save the cost for review and supervision.(3) This paper uses the Logit and Fisher linear discriminant method to set up two kindsof credit risk models which show the influence factors for small agricultural enterprises, andfind that the prediction accuracy of the default loan is less than60%, which can lead the bankto mistaking high-risk enterprise for low-risk ones, which loans will be difficult to recover,and cause huge losses to the bank. If the bank wants to control the credit risk for smallagricultural enterprises more accurately, there must have macroeconomic factors analysis andagricultural enterprise basic information as the primary factors, and combined it with model.It is also the main innovation points of this paper that puts the quantitative analysis of modeland qualitative analysis of cases together, which can improve the banks’ credit-riskassessment process for small enterprises, and can help to improve prediction accuracy.(4) Although mortgage can reduce the credit risk of bank to some extent, if themortgaged property is the farmhouse, there will be legal problems such as property andcirculation. Because of the lack of establishment of farmhouse circulation mechanism, it isdifficult for the mortgaged property to be sold. So the bank should focus on the disposalproblems of mortgage houses. Before the lending, banks must carry out the on-the-spotinvestigation and full-scale evaluation in order to reduce the default-loan losses.(5) To solve the small agricultural enterprises’ financing problems, it can’t totally rely onthe bank, and also needs government and social parties to participate. In the support of policy,it needs the bank’s, guarantee agencies’ and agricultural enterprises’ cooperation, which canhelp the bank reduce agricultural credit risk, and open up more financing channels for smallenterprises, and thoroughly solve the financing difficulties for small agricultural enterprises,and help the small agricultural enterprises develop better and faster to form a virtuous cycle.