Farmers credit optimization decision model and applications based on common risk guarantee fund

Abstract

The paper proposes the farmers credit optimization decision model and applications based on common risk guarantee fund. By considering two conditions of with default risk and without default risk, the individual rationality of bank and farmer is designed, respectively, and the mathematical formulas for calculating the risk loss ratio of bank loans under the guarantee fund are established and discussed innovatively, respectively. A nonlinear optimal model based on risk compensation fund is established in the paper. By mathematical proof, the optimal bank credit decision mechanism is studied. By the analysis of numeric experiments of two cases of with default risk and without default risk, the expected income and invest income are varied by the changing of farmer project success probability and default probability, and the relationship of loan interest, farmer expected income and invest income is studied. The research has scientific guiding significance and practical application value for farmers' credit decision making.