Consistency of credit evaluations at agricultural banks

Abstract

Commercial banks are using more comprehensive and formal methods to evaluate agricultural producers. This study reports the characteristics and performance of 87 credit scoring models currently in use by lenders. True product-moment and rank correlations are used to measure consistency among the models. The results of this study underscore the continuing lack of a uniform model or models for lenders to use in evaluating the creditworthiness of agricultural borrowers. The relatively high disparity among the systems now in place suggest informational deficiencies in this aspect of rural credit markets, and the need for further interchange among lenders, borrowers and analysts about the properties of credit scoring models. 0 1992 John Wiley & Sons, Inc.Over the past decade, greater precision in credit evaluation of agricultural borrowers has occurred as a result of the farm financial crisis and loan losses of the 1980s, increased competition among lenders, efforts to control lending costs, and improvements in loan information systems. A major evolution in the credit evaluation procedures has been the risk assessment (or credit scoring) of borrowers based on numerical measures of a borrower's financial condition and management ability. These procedures assist lenders with loan approval, loan pricing, loan monitoring, and evaluation of loan portfolio risks. Numerous credit risk Paul N .

Short‐ and Long‐Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure‐Constrained Profit Functions

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The Impact of Credit Market Imperfections on Farm Investment in Poland

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