Study On Agricultural Structured Finance And Its Credit Risk

The emergence of Agricultural Structured Finance(ASF) model eases the difficulty in capital matching which confines the rural financial market. This study explores the theoretical implications and features of ASF model in depth, in the meantime, constructs the credit risk evaluation model and applies the model on warehouse financing. The study values in comprehending the ASF model in a systematical way and in promoting the fundamental research in this area. It can also be reckoned as an important academic reference to develop the ASF model in sustainable way and to secure the rural financial market.The study mainly applies dual academic research approaches, consisting of literature review and qualitative analysis, on exploring the connotations, features, functions and limitations of ASF model. Moreover, the study analyzes the main contents of credit risk within the model. Notably, the qualitative analysis is mainly based on Financial Innovation Theory, Transaction Cost Theory, and Credit Risk Theory. It also draws on the experience of some irrelevant research findings and a case study. The conclusions are as follows: firstly, the ASF model, which is featured as structured financing, plays a positive role in decreasing the transaction cost in dealings of agricultural credit as an important financial innovation. Secondly, the credit risk in ASF model consists of default risk and counterparty credit risk, making it categorized into modern credit risk, but with its particularity.Further, the study constructs a quantitative analytical model to evaluate the risk in agricultural structural financing. The model is based on Merton’s Model and then empirically analyzed by taking warehouse financing as an example. It is indicated that financial institutions shall apply the modern credit risk model on strengthening the capability in managing the credit risk; meanwhile, the problem in capital matching in rural areas be further eased. The loan in ASF shall be maintained at the “security threshold level”. Besides, the interest rate for the loan shall be lower than what for loans with same period in tranditional finance system.The study attempts to integrate the related research findings, and explores the meanings of ASF deeply from multiple prospectives of view. Then the study applies the modern risk evaluation approach on analyzing the credit risk. In general, the study contains the practical meanings and is of theoretical innovation. Hope that it could provide insight into the development of ASF model and the stabilization of rural financial market.