Factors Influencing Agricultural Credits Repayment Performance among Farmers in East Azarbaijan Province of Iran

Abstract

One of the main challenges facing the Agriculture B ank of Iran regarding lending loans is the high probability of default by farmers. Seve ral factors could be involved in this issue and should be considered in order to control and reduce the risk in the failure of repayment. This study aimed to examine the factors affecting the repayment performance of agricultural loans in the city of Maragheh in Ea st Azarbaijan Province of Iran. Required data were obtained from a sample of 779 in dividual farmers who had previously received loans from Agricultural Bank during the pe riod 2004-2008. Nested Logit Model (NLM) was applied for analyzing the data and, for t his purpose, STATA software was used in the study. Results revealed that having an activity besides farming, extension of the repayment period of the loan, and large volume of received loans are the factors that had significant negative impacts on loan repayment. On the other hand, factors including high interest rates of loans, having collateral of guarantor, services received from the banks, and long term maturity period for the loans increase the probability of timely loan repayment significantly. Keywords: Agricultural bank, Agricultural credits, Nested Lo git Model, Probability of repayment failure, Repayment performance.