Abstract
By the end of 2011, agricultural population in accounted for 48.73% in China. Also, farmers in China are dispersed and their financial information is incomplete, which leads to credit risk evaluation system of farmers in China is not sound at all. Most Chinese banks even have not established the rating system, so farmer credit risk rating system pressed for solution. This study proposes an index screening method based on correlation analysis and significant discriminant. The proposed method is demonstrated using the 2044 petty loans for farmers of a Chinese state-owned commercial bank’s. The results demonstrate that the proposed method can accurately screen the indicators, which can effectively distinguish default customers from non-default ones. Moreover, the results of an empirical study showed that “Loan purpose”, “Expenses/ incomes”, “Increasing rate of regional GDP” are the key indicators to distinguish default customers from non-default ones.
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