Credit Capacity Research Articles

CREDIT WORTHINESS OF SOME FARMERS IN NUBARIA

Agricultural credit plays an important and, indeed, crucial role in solving many of the difficult problems faced by farmers, especially their young ones, where financing is the mainstay of agricultural investment. The research problem is the high level of financing requirements in the new lands, in addition to some economic problems facing the agricultural sector in general and the new lands in particular. The objective of the research is to determine the creditworthiness of a sample of farmers in the new lands and to determine their ability to achieve a return that allows the repayment of the loan Its cost, and increase the net income of the borrower. As well as to identify the social and economic characteristics of the sample of the research, and identify the most important financing problems facing the new land farmers, and how to overcome them. The results showed that the increase in the volume of loans to cover the costs had a positive effect on the productivity of acres of crops. The ratio of debt coverage to the total average yield of field crops was achieved more than once, covering about 1.4 of the total debt. The yield of vegetable crops achieved more than twice, about 2.2of the total debt. As for the ratio of debt coverage to the total average yield of fruit crops, it achieved three times, about 3.3 of total debt. That is, all crops have a return that covers the required debt, ie, they have a high credit capacity. Although the bank is vulnerable to high risk loans, it does not cover the total return of crops by 100% although all the sample has guarantees other than crop yield, which makes them have credit capacity exceeding 100% of their crop yield. To cover the bank debt from the net yield of crops.

Scoring is an expert method for predicting the credit capacity of social assets

The article defines that modern approaches to solving the credit issue, while minimizing the risk of possible losses, need to introduce new effective risk management principles and computer decision support systems. The construction of such systems involves the development and use of a variety of alternative methods for analyzing data, alternative models and relevant criteria for analyzing the quality of models and the final result – the probability of non-return of credit. It has been proven that the use of the scoring model as one of the main risk management tools of credit operations is recognized worldwide as one of the most effective. In modern foreign banking practice, when building a scoring system, most often, such client characteristics are taken into account: the number of children, marital status, income, telephone availability, and the period of cooperation with the bank. In recent years, scoring systems have become widespread in the activities of domestic banks. Keywords credit scoring, scoring model, creditworthiness of individuals, bank accountant, post-manager, credit scoring technology.

Petrol Prices and Government Bonds Risk Premiums

Emerging countries, like Brazil, China and India are in constant evolution since the early 90s. During this period, the issuance of bonds by developing countries has increased significantly reflecting their needs substantial investment in infrastructure and long-term projects. But at the same time, they had to face a series of financial crises that has significantly reduced their credit capacity and increasing the spread, therefore the cost of financing. The aim of this paper is to understand the determinants of this spread and the macroeconomic indicators and other variables which can explain it.

Cash Holdings and Risky Access to Future Credit

I quantify a new motive of holding cash through the channel of financing risk. I show that if the access to future credit is risky, firms may issue long-term debt now and save funds in cash to secure the current credit capacity for the future. I structurally estimate the model and find that this motive explains about 30% of cash holdings in the data. Counterfactual experiments indicate that the value of holding cash is around 8% of shareholder value.

Analysis of the Relationship Between Credit Capacity of Turkish Banking System with Economic Growth

Bu calismada, Turk Bankacilik sistemine ait 2002:C4 ile 2016:C2 donemi icin ucer aylik gozlem degerleri kullanilarak mevduatin krediye donus orani ve iktisadi buyume arasindaki iliski arastirilmistir. Bu amac dogrultusunda; geleneksel birim kok testleri, Johansen esbutunlesme testi ve Granger nedensellik testi kullanilmistir. Elde edilen bulgular neticesinde; incelenen serilerin birinci mertebenden duragan oldugunu sonucuna ulasilmistir. Uygulanan Johansen esbutunlesme testi ile iki seri arasinda uzun donemli bir denge iliskisi oldugu sonucuna ulasilmistir. Ayrica Granger nedensellik testi ile iktisadi buyumeden mevduatin krediye donus oranina dogru tek yonlu bir nedensellik oldugu saptanmistir.

PRUDENTIAL CONSTRAINS OF BANKS LENDING ACTIVITIES AFTER FINANCIAL CRISIS

Both economic practice and economic theory are interested in analyzing the role of financial sector in promoting the economic development and economic growth. Commercial banks are the most important financial institutions in bank-based economies. The lending activities of commercial banks are limited by regulatory framework, management decisions and credit capacities of borrowers. Regulatory framework has been limited lending potentials of commercial banks because of capital requirements and liquidity management costs. Information asymmetry and adverse selection in decision-making enforce commercial banks to implement credit rationing process even in case of social significance of investment projects. Social responsibility of commercial banks cannot be measured according to the risk-taking activities. Banking financial intermediations have to keep the value of savings deposits under control and protect the stability of financial system. This paper will analyze the risk structure and prudential constrains of bank lending activities. To employ the credit capacity of commercial banks, it is necessary to extend guarantee schemes or promote the alternative financing opportunities in sharing the risk of accelerated growth.

Do operating leases expand credit capacity? Evidence from borrowing costs and credit ratings

We document that borrowing costs and credit ratings are less sensitive to off-balance sheet lease financing than to on-balance sheet debt financing, particularly for firms that are financially constrained and firms that have limited ability to use tax shields. This evidence is consistent with theoretical predictions based on tax benefits as well as bankruptcy costs. Our evidence on borrowing costs and credit ratings suggests that credit markets treat operating leases differently from balance sheet debt. Consistent with this interpretation, we document that firms closer to ratings borderlines lease more, particularly around the investment grade borderline.

Selected Determinants of Mezzanine Financing in Poland

A very significant form of company activity determining its development and even survival is innovation activity. Raising capital for the implementation of innovation is an important but not the only factor in the introduction of innovation. Characteristics of innovation, and in particular the risk of failure, make for a significant difficulty in obtaining external financing, particularly from third parties, which is an obstacle to their development and implementation. The subject of discussion in the article is the hybrid formula mezzanine type of financing innovative projects implemented both in start-up companies and in already well established companies. The purpose of the article is to discuss the possibilities and to perform an analysis of the practices followed by mezzanine funds in Poland in respect to the innovation activities of Polish companies. Research presented in the article was conducted on the basis of information on investments performed by mezzanine funds in Poland. Of particular importance for the innovativeness of the economy is to have companies from the SME sector, and therefore we also carried out research in this group. Innovations are often initiated in special purpose companies, start-up, etc., that operate in the SME sector. Therefore, the financing of innovation cannot be ignored as a thread of innovation in SMEs. The study involved interviews in several companies in the sector. The study concerned the possibilities of financing innovation involving mezzanine, knowledge of hybrid forms of financing, preparedness for hybrid financing. Studies are not representative, but are rather sounding a view to clarify any further research. Hypothesis: mezzanine financing, utilizing its specific benefits, is increasingly used to finance the gap in the financing of innovation, in particular special purpose companies in the SME sector. So the hypothesis raises two strands of research. The first concerned the financing of innovation as seen from the mezzanine fund. The second concerns the willingness of enterprises to use this form of financing. The first part of the article is devoted to the embeddedness of mezzanine financing. For that purpose, the specific innovation feature decisive to the possibility of external financing was indicated. Various investment strategies of Private Equity Funds on a global scale were presented in a way intended to highlight the meaning and characteristics of mezzanine financing. Also, on the basis of statistical data, the potential market for innovation financing in Poland was indicated. Subsequently the essence of mezzanine type financing and its potential to support development and innovation was presented. Upon this background, an analysis of the possibilities for financing innovation in startups and established companies was conducted. Also, examples of mezzanine financing that took place in Poland in recent years were presented. The article, therefore, is constructed in the form of deductive-inductive analysis. The conducted research leads to the conclusion that there is a gradual development of mezzanine financing in Poland. The transactions are also diverse as to the industry sector and the size of the investment. There is also a noticeable lowering of the minimum quota of individual investments, which means that the popularity of this form of financing could increase. What needs to be noticed, however, is that mezzanine funds focus their activity on companies in good financial condition, which do not have the credit capacity for the implementation of all their development projects. They have the characteristics of a mature organization. So they have: a strategy, experienced management, good cash flow, good market position and growth potential.

Large Banks, Loan Rate Markup and Monetary Policy

This paper studies the implications of introducing large monopolistic banks, which can affect macroeconomic outcomes and thus the response of monetary policy to inflation, in a model with a collateral constraint linking the borrowers’ credit capacity to the value of their durable assets. First, we find that strategic interaction generates a countercyclical loan spread, which amplifies the impact of monetary and technology shocks on the real economy. This type of financial accelerator adds up to the one due to financial frictions and is crucially related to the existence of non-atomistic banks. Second, the level of the spread and the degree of amplification are positively related to the level of entrepreneurs’ leverage, reflecting the fact that higher leverage implies greater elasticity of the policy rate to changes in loan rates, which in turn increases banks’ market power. Third, we find that amplification is stronger the more aggressive the central bank’s response to inflation, as measured by the inflation coefficient in the Taylor rule.

Research of factors of credit capacity formation of the Ukrainian banking system in dollarization conditions

It is shown the research of factors that have an effect on credit capacity formation of the banking system of Ukraine, which is relevant and useful in reducing public funding, deteriorating creditworthiness of companies and private persons, decline of domestic investment demand and bad research of these problems in national scientific literature.By means of multivariate correlation and regression analysis it is done the direction and density of connection between the object, and the model of process development is proposed. Credit capacity formation of the banking system at present is influenced by a large number of external factors. It is proved that significant influence on credit capacity formation of the banking system under dollarization have: volumes of external assets in foreign currency, transferable deposits in foreign currency, foreign exchange earnings, fundraising of businesses and individuals in foreign currency deposits. It is grounded the model of interdependence of determined factors and credit capacity of banking system, the use of which can significantly improve the regulatory activities of the National Bank in this direction.

The Gay Immigrant and the Use of Spanglish in Ángel Lozada’s No quiero quedarme sola y vacía : A Linguistic Transgression or a Struggle to Assimilate in the Late Capitalist City?

The Gay Immigrant and the Use of Spanglish in Ángel Lozada’s No quiero quedarme sola y vacía:A Linguistic Transgression or a Struggle to Assimilate in the Late Capitalist City? Andrés Aluma-Cazorla ¡ngel Lozada’s No quiero quedarme sola y vacía (2006) is the story of a homosexual from Puerto Rico, linked to the success and failure of the neoliberal mercantilist system during the end of the twentieth century and beginnings of the twenty first century. The presence of Spanglish throughout the novel, more than a characteristic element of a linguistic transgression, is a parody of the protagonist’s struggle to overcome the hostility of New York and to be accepted into the cultural and social environment of his host city through the use of language, without luck. This acceptance can be accomplished by his purchase and debt capacity that grants him access to the goods and services offered by the system and portrayed in New York as the Mecca of consumerism. The only possible visibility offered by the city for him is his credit history. If his credit capacity fades away, he becomes useless, just like many of the underprivileged citizens living in the city. Here, the narrator describes the way New York takes care of its underprivileged citizens. Hurry, hurry, take the A train. Dentro de mí se monta La loca. … Se levanta cuando uno de los homeless apestosos choca contra ella, y angustiada, se fija en lo que le espera: miro a los viejitos montarse en el tren, a veces con andadores y a la gente que no les cede las sillas. … Yo transporto la muerte. … Y de nuevo se enfocaba en las paredes llenas de anuncios: I can live with foot pain, but why should I? Retrato de un pato boricua y un negro: dos buenas razones para hacerse la prueba del VIH y que le recuerda su caso: Como si a los únicos que nos diera SIDA fuera a nosotros los latinos y a los negros. (Lozada 25–26) This passage coincides with what Slavoj Žižek (2008) calls “systematic violence of capitalism” (12). This violence is more extraordinary: violence not proffered by any other direct agent and defined solely in an objective, methodic and anonymous way as the one proffered by ideologies. In that way, the metaphor represented by the A-train of New York summarizes the violent and classist image of the city as a body transporting its waste through its entrails. These people, viewed by the city as waste, seem to be on their way to be eliminated and are represented as the most marginal elements of its society: the elderly, the beggars, the sexual, ethnic and racial minorities, and the sick, who also are mentioned in the dominant discourse of AIDS advertisements, a discourse that describes “Afro-Americans, female and male prostitutes, bisexuals and gays, drugs consumers and immigrants as the causes of the propagation of HIV” (La Fountain-Stokes 2009: 46). Lozada does not leave in this novel any open space for a vindication of his sexual freedom. He does not propose a transgression to the system in which he is forced to live. For La loca, New York is only a monster, which condemns its marginal and underprivileged inhabitants to being isolated and meaningless, being forced to disappear out of the glamour of the city by getting inside of it, or in its outskirts destined for them. Therefore, one can understand the magnitude [End Page 364] of La loca’s physical and psychological degradation when he discovers that his only empowering instrument, his credit history, is fading away, sentencing him to stay sola y vacía in the once utopic city of New York. Andrés Aluma-Cazorla University of Illinois–Chicago WORKS CITED La Fountain-Stokes, Lawrence M. (2009). Queer Ricans: Cultures and Sexualities in the Diaspora. Minneapolis: U of Minnesota P. Print. Google Scholar Lozada, á ngel. (2006). No quiero quedarme sola y vacía. San Juan: Isla Negra. Print. Google Scholar Žižek, Slavoj. (2008). Violence: Six Sideways Reflections. New York: Picador. Print. [End Page 365] Google Scholar Copyright © 2014 American Association of Teachers of Spanish and Portuguese, Inc.

Mexico’s Financial Reforms

:The North American Free Trade Agreement (NAFTA) is not only an agreement covering tradable commodities; it includes important chapters on services, especially financial services. In addition, NAFTA is also a foundational agreement for investment protection. The free movement of capital and the safeguarding of ownership rights are essential features. This article argues that Mexico’s financial reform in 1989–92 was a precondition for trade and financial liberalization under NAFTA. Thus, the content of this reform is analyzed and compared with the one carried out during the 1970s, which also opened up the financial market. Subsequently, the establishment of financial subsidiaries, and the global financial business model and its consequences on financing, are examined. Although it is not a monetary union, NAFTA does set up a form of financial junction. For Mexico, this junction signifies a global/national funding determination. It is argued that the regionalization of credit is fanciful, since credit regionalization pretends to set a constraint on the credit capacity of the central bank vis-à-vis the government and to transfer this capacity to the market. The idea of replacing the central bank’s role as a lender of last resort, in the context of the current financial climate of “too-bigto-fail,” through legislated changes cannot rely upon the support of a globalized financial system dealing in national or regional currencies.

Market Recognition of the Accounting Disclosure and Economic Benefits of Operating Leases: Evidence from Borrowing Costs and Credit Ratings

We contribute to the current debate on the accounting treatment of operating leases by providing evidence from bond markets and private lending on the market recognition of the role of leasing in determining borrowing costs and credit ratings. Borrowing costs and credit ratings are less sensitive to lease obligations than to debt financing for firms that are financially constrained or have lower marginal tax rates, consistent with theoretical predictions based on tax sharing and bankruptcy costs. Firms closer to ratings borderlines lease more, especially those firms around the investment grade borderline. Our evidence suggests that leasing provides financial flexibility to some firms, relative to debt financing, by preserving or extending credit capacity, and that the credit markets evaluate the economic characteristics of operating leases and treat them differently in their pricing. Our finding on the differential pricing in the credit market is particularly relevant to the current lease accounting debate because the mandatory capitalization under the proposed new accounting rule might curtail such differentiation, diminishing the information value of financial statements. We expect to observe a continuing demand for leases independent of accounting treatments as long as there are economic benefits associated with lease transactions such as preserving or expanding credit capacity.

Leasing and Credit Capacity: Evidence from Borrowing Costs and Credit Ratings

In this paper we examine the role of off-balance sheet leasing in determining firm borrowing costs and credit ratings. Borrowing costs increase and credit ratings decrease as firms add debt, whether on or off balance sheet. However, we find that borrowing costs and credit ratings are more sensitive to balance sheet debt than to off balance sheet financing (i.e., leasing). This finding suggests that leasing does not fully substitute for debt, but instead can expand total credit capacity. Consistent with theoretical predictions, leasing is more advantageous (lower impact on the cost of debt) for firms that are financially constrained (Eisfeldt and Rampini, 2009) and have lower marginal tax rates (Lewis and Schallheim, 1992), i.e., those who stand to benefit the most from additional access to capital. We also find evidence that firms closer to ratings borderlines are more likely to lease, particularly those firms just around the investment grade borderline. Our evidence from borrowing costs, credit ratings and lease financing decisions is consistent with the idea that leasing allows some firms to expand their credit capacity.

Moving On…

Moving On…

Measuring credit capacity on Danish farms using DEA

Purpose – The purpose of this paper is to introduce a novel measure of access to credit suited to estimate the relative change in credit reserves. Design/methodology/approach – A debt possibility frontier is estimated using data envelopment analysis and the Malmquist index is calculated. The Malmquist index is redubbed the Debt Development index and decomposed into “change in debt capacity” and “change in debt capacity utilization”. Bootstrapping is applied for statistical inference. The method is applied to an unbalanced panel of 92,000 Danish farm accounts from 1996 to 2009. Findings – The paper finds that credit capacity roughly doubled for Danish farmers over the period, and that utilization of credit capacity generally was proportional to capacity change, utilization being higher for dairy and pig farms, than for crop farms. Research limitations/implications – Changes in credit reserves may have important implications for risk management practice, investment and technology adoption and related policy issues. The method is limited by the possibility of strategic behavior of lenders during credit cycle busts. In credit cycle booms, the method gives a good basis for the estimates of change in credit reserves. Practical implications – In a period of increasing credit reserves, risk management institutions are unlikely to develop. Like agricultural policy, access to credit may crowd out market-based risk management. Originality/value – The study represents a novel application and interpretation of a well-known method.

The EPQ model under conditions of two levels of trade credit and limited storage capacity in supply chain management

An inventory problem involves a lot of factors influencing inventory decisions. To understand it, the traditional economic production quantity (EPQ) model plays rather important role for inventory analysis. Although the traditional EPQ models are still widely used in industry, practitioners frequently question validities of assumptions of these models such that their use encounters challenges and difficulties. So, this article tries to present a new inventory model by considering two levels of trade credit, finite replenishment rate and limited storage capacity together to relax the basic assumptions of the traditional EPQ model to improve the environment of the use of it. Keeping in mind cost-minimisation strategy, four easy-to-use theorems are developed to characterise the optimal solution. Finally, the sensitivity analyses are executed to investigate the effects of the various parameters on ordering policies and the annual total relevant costs of the inventory system.

Credit creation and social optimality

In this paper the author asks how confident we can be that the quantity of bank credit supplied and demanded, and the allocation of that credit to different sectors or activities will be socially optimal, if we leave the credit creation and allocation process to free market mechanisms, subject only to the indirect levers of static prudential controls and interest rate based monetary policy. The answer is: not very confident. In that case, what are the implications for public policy? The paper adopts a quantity theory of credit perspective as a tool of analysis. Credit creation for financial transactions drives asset prices, but the process is unsustainable. Interest rates and other conventional policy levers cannot prevent such booms. Equally, downswings are self-reinforcing and not easy to end with interest rates as key tool. A new macroprudential policy is hence required to focus on this aspect. This needs to get far more involved in the details of credit capacity and even of the sectoral allocation of credit, than has been practiced for several decades. If the allocation of credit can be biased in a sub-optimal fashion by asset price effects, by organisational and behavioural biases and by imperfect information, then we cannot exclude the need for policy interventions which offset the bias, whether by restraining some categories of credit or favouring others. This could be important not just to manage the conjunctural impact of the credit/asset price cycle, but also to ensure that important investment priorities are funded. The creation of the Green Investment Bank is predicated on such logic.

Factors influencing involvement of peri-urban farmers in mini-livestock farming in south-western Nigeria

The study focused on factors influencing involvement of peri-urban farmers in mini-livestock farming in South-Western Nigeria. Specifically, the peri-urban farmers’ socio-economic characteristics were described, their level of involvement in rearing mini-livestock were determined and constraint associated with mini-livestock farming were examined. 182 respondents were interviewed through the use of structured interview schedule and Focus Group Discussions (FGDs). Data analysis was carried out using frequency counts, percentage, and factor analysis. The results of the study showed that more males were involved in mini-livestock rearing than females, while the mean age of a farmer was 46 years. Majorities were literate and information sourced from fellow farmers was most common and reliable source of information accessible by the respondents, while there was low extension contact. Problems confronting the respondents include inadequate credit facilities, untimely supply of inputs, improper management skill and low extension contacts. Results of the factor analysis revealed eleven factors which contributed to farmers’ involvement in mini-livestock farming. These include community influence, farmland acquisition, characteristics of mini-livestock, personality factor, and economic status. Other factors were capacity building, household composition, external orientation, farm characteristics, social group orientation and communication tool. The study concluded that policy making on mini-livestock development should focus at enhancing the socio-economic status of peri-urban farmers through improved to access to credit facilities and capacity building through training on improved management practice. This could have a profound influence on increased production, sustainable livelihood and alleviation of poverty among the populace.

Banking Competition, Housing Prices and Macroeconomic Stability

We develop a macroeconomic model with an imperfectly competitive bank‐loans market and collateral constraints that tie investors’ credit capacity to the value of their real estate holdings. Lending margins are optimally set by banks and have a significant effect on aggregate variables. Over the long run, stronger banking competition increases output by triggering a reallocation of available collateral towards investors. In the short‐run, output, credit and housing prices are more responsive on impact to shocks in an environment of highly competitive banks. Also, stronger banking competition implies higher (lower) persistency of credit and output after a monetary (credit crunch) shock.