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- Short-Term Agricultural Credit Repayment in Central Luzon
Short-Term Agricultural Credit Repayment in Central Luzon
Thesis Abstract:
The study was conducted primarily to identify the critical determinants of loan repayment and measure the extent to which these factors affect repayment of short-term agricultural credit by regression analysis, and to apply the discriminant analysis technique to identify the characteristics of low and high repayin g Masagana 99 borrowers in fo u r Central Luzon provinces.
Repayment rates of borrowers ranged from 21% in Bulacan to 49% in tarlac and appeared to be related to farm area, yield, percent production sold and amount of outstanding loan. The majority of the borrowers attributed nonpayment of loans to crop failure. Other reasons for nonrepayment were low production due to misapplication of funds, unaccustomed to paying loans, inadequate collection mechanism and "dole-out' attitude.
Statistical results showed that yield and percentage loan used in agriculture were the most significant variables explaining the repayment performance of borrowers. Other statistically significant variables were per cent area irrigated, percent production sold, amount of outstanding loan, total annual income, annual family expenditure and source of loan. Except for area irrigated, the signs of regression coefficients conformed with a prioriexpectations
Low and high repayment borrowers manifested significant differences with respect to yield, total annual income, percent production sold and amount of outstanding loan. The discriminant function correctly classified 67% of the borrowers included in the analysis.
Two classification functions - one each for the low and high repayment borrowers were developed to help classify the borrowers when the only information known were their values on farm size, percent area irrigated, percent production sold, outstanding loan, percent loan used in agriculture, total annual income and annual family expenditure.