Research on Affection Mechanism of Joint-Liability Farmers’ Correlated Project Outcomes on Lending Institution

Abstract

Since the agricultural industrial structure is mostly single in the same region, the outcomes of farmers taking a group lending contract are always positively correlated to each other, which then results in group default risk. This paper focuses on farmers’ joint-liability loan with correlated project outcomes, and comparatively analyzes the correlation’s affection on lending institution by constructing its expected revenue function with relevant mathematical tools like probability theory, aiming at exploring effective solution to preventing the group default risk.