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Article
Publication date: 5 September 2016

Ying (Jessica) Cao, Calum Turvey, Jiujie Ma, Rong Kong, Guangwen He and Jubo Yan

The purpose of this paper is to investigate whether negative incentives in the pay-for-performance mechanism would trigger loan officers to strategically reject…

Abstract

Purpose

The purpose of this paper is to investigate whether negative incentives in the pay-for-performance mechanism would trigger loan officers to strategically reject potentially good loans. If so, what is the feasible solution to alleviate the problem.

Design/methodology/approach

A framed field experiment was conducted to test loan decision behaviors using loan officers from Rural Credit Cooperatives in Shandong, China. A 2 by 2 between-subject design was adopted to generate variation in incentives and prior information about credit risks.

Findings

Results showed that loan officers did ration credit by rejecting more loans when facing risks of personal income loss. However, providing risk information about the application pool boosted the approval rate and offset the behavioral responses by a roughly same magnitude.

Research limitations/implications

Findings in this study suggest that certain institutional settings can result in credit rationing via strategic loan misclassification. Further, information sometimes generates similar effects as those costly incentives or mechanisms that are not implementable in practice.

Originality/value

This study adopted an innovative monetized experimental design that allows researchers to examine the (otherwise unobservable) trade-offs between Type I and Type II error in loan misclassification as incentives change. In addition, an anchoring prior information treatment is used to solicit the relative power of almost costless information and costly monetary incentives, and to point out a potentially feasible solution.

Details

Agricultural Finance Review, vol. 76 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 28 October 2011

Calum G. Turvey, Guangwen He, Rong Kong, Jiujie Ma and Patrick Meagher

The purpose of this paper is to provide an overview of the farm and rural credit system in China. To do this the authors use the so‐called “7 Cs” of credit (these include…

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Abstract

Purpose

The purpose of this paper is to provide an overview of the farm and rural credit system in China. To do this the authors use the so‐called “7 Cs” of credit (these include: Credit, Character, Capacity, Capital, Condition, Capability, and Collateral) and for each “C” provide some aspect of importance related to agricultural finance.

Design/methodology/approach

This paper is largely based on a survey of 897 farm households in Shaanxi and Gansu provinces, and extensive interviews of agricultural lenders conducted in the summer and fall of 2009. These data are used in simple form and in regression form to explain a variety of credit issues in China.

Findings

A number of key factors related to credit delivery and demand are found. First, using the 7 Cs as a guide proved to be very fruitful for disentangling the many institutional and cultural facets affecting rural credit in China. Under “Character” the authors discuss the cultural characteristics of the Chinese farmer in terms of informal lending and borrowing; under “Capacity” the authors discuss the challenges of delivering credit to farms with limited resources; under “Condition” the authors discuss group guarantees and credit worthy villages, credit rationing and insurance and incomplete markets; under “Capability” the authors discuss income inequality and challenges in economies of scale and size; and for “Collateral” the authors discuss the implications of lack of collateral and limitations on farm economic growth due to the collectivization of land and the potential for agricultural lending from the transferability and mortgagability of land or forestry use rights.

Research limitations/implications

Although the assessment provides a great deal of breadth and depth across many credit‐related issues in China, it is not an exhaustive study. Agricultural and rural credit in China is very complex and in many instance under developed. The survey results from Shaanxi and Gansu tell a story that is consistently told throughout China, but the authors would caution against using the data to characterize farm credit across China as a whole.

Social implications

Large swaths of China have either no or very rudimentary credit services. Even in areas where credit is in supply there are issues of poverty that could be aided with credit access and delivery. In order to improve livelihoods through credit institutions, it is important to understand rural credit in many dimensions. This paper takes a step in that direction.

Originality/value

Despite the importance of rural credit in China, it is largely understudied and not well understood. This paper makes progress in providing such an understanding. Our reasoning for using our unique approach is that by understanding the 7 Cs of credit one comes to understand the elemental characteristics of the credit decision from the lender's point of view but in a way that takes into account conditions at the farm level. The 7 Cs provide an objective approach to credit assessment that balances both the supply of and demand for credit.

Details

Journal of Agribusiness in Developing and Emerging Economies, vol. 1 no. 2
Type: Research Article
ISSN: 2044-0839

Keywords

Article
Publication date: 22 November 2011

Rong Kong, Calum G. Turvey, Guangwen He, Jiujie Ma and Patrick Meagher

China frequently suffers from weather‐related natural disasters and weather risk is recognized as a source of wide‐spread systemic risk throughout large swaths of China…

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Abstract

Purpose

China frequently suffers from weather‐related natural disasters and weather risk is recognized as a source of wide‐spread systemic risk throughout large swaths of China. During these periods farmers' crops are at risk and for a largely poor population few can afford the turmoil to livelihoods that goes along with drought. The purpose of this paper is to investigate the willingness of Shaanxi and Gansu farmers to purchase weather insurance.

Design/methodology/approach

This paper is based on surveyed results of 890 farm households in Shaanxi and Gansu provinces. The survey was designed specifically to extract willingness to pay for weather insurance. Factor affecting willingness to pay are explained using linear regression.

Findings

The authors find strong evidence that the demand for drought insurance is downward sloping and also believe from the analysis that the demand is fairly elastic. This suggests that price matters and the results suggest that in order for wide spread adoption of weather insurance farmers will require a substantial premium, perhaps in the order of 80 per cent, as is being applied to current crop insurance initiatives. The authors find, as expected, that crop producers would be willing to pay more for insurance than livestock producers, but also find, as one would expect, that the key indicator is risk. Using a Pert distribution, the authors constructed from information gathered from farmers the expected values and standard deviations of gross revenues and yields of the most prominent crop and constructed the coefficient of variation. It was found in both cases that the higher the CV the greater the willingness to pay.

Originality/value

The authors believe that this is the first willingness‐to‐pay study of weather insurance uptake in China. The authors used a unique “experimental” design and investigation technique to determine weather insurance demand.

Details

China Agricultural Economic Review, vol. 3 no. 4
Type: Research Article
ISSN: 1756-137X

Keywords

Content available
Article
Publication date: 28 August 2009

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Abstract

Details

China Agricultural Economic Review, vol. 1 no. 4
Type: Research Article
ISSN: 1756-137X

Abstract

Details

China Agricultural Economic Review, vol. 3 no. 4
Type: Research Article
ISSN: 1756-137X

Content available

Abstract

Details

Agricultural Finance Review, vol. 74 no. 2
Type: Research Article
ISSN: 0002-1466

Article
Publication date: 1 April 2014

Rong Kong, Calum Turvey, Xiaolan Xu and Fei Liu

The purpose of this paper is to investigate the lender-borrower relationship as it relates to Sannong loans for agricultural and rural financial markets by Rural Credit…

Abstract

Purpose

The purpose of this paper is to investigate the lender-borrower relationship as it relates to Sannong loans for agricultural and rural financial markets by Rural Credit Cooperatives (RCCs) and other rural lenders. This paper is motivated by recent reforms to the rural credit market designed to encourage increased lending, particularly to farmers. Little is understood about the lender-borrower relationship in rural China. This paper fills that gap.

Design/methodology/approach

The paper investigates relational attitudes between 120 loan officers at RCCs in China's costal Shandong province, paired with a field survey using matched questions to 394 farm households in the same region. Pairing lenders’ perception toward borrowers regarding RCC microcredit lending mechanism, against borrowers’ perception toward lenders and how themselves were perceived by lenders in the same regards, the paper investigates the degree of disconnect between lenders and with distinct cluster groupings based on their perceptions, the paper analyzes the influence of demographics on the borrower and lender cluster memberships.

Findings

The paper identifies four borrower clusters and two lender clusters. Borrower clusters are segmented on credit access and satisfaction with their rural lender. The paper also identifies two lender clusters, segmented principally on financial incentives and lending activities. While all lenders view farming with higher regard than farmers believe they do, one cluster is clearly pro-farmer while the second is somewhat indifferent. Indifference is more related to current portfolio activities. The paper draws conclusions that policy initiatives should be put in place at RCCs that close the gap between lender and borrower in their credit relationship. Rural lenders should concentrate on advocating RCCs’ care and trust toward agriculture and farm households. At the institutional level, effort should be extended to train a dedicated team of loan officers that specialize in servicing farm households with standardized lending practices. This research provides financial institutions with outreach mechanisms to borrowers, while also training lenders to borrowers’ sensitivities.

Originality/value

Management studies of RCCs are few. This is the first paper that the authors are aware of that studies farmer and lender attitudes on the same scale.

Details

International Journal of Bank Marketing, vol. 32 no. 2
Type: Research Article
ISSN: 0265-2323

Keywords

Article
Publication date: 2 August 2013

M. Ilangkumaran, V. Sasirekha, L. Anojkumar, G. Sakthivel, M. Boopathi Raja, T. Ruban Sundara Raj, CNS. Siddhartha, P. Nizamuddin and S. Praveen Kumar

This paper aims to describe an application of hybrid Multi Criteria Decision Making (MCDM) technique for the selection of wastewater treatment (WWT) technology for…

Abstract

Purpose

This paper aims to describe an application of hybrid Multi Criteria Decision Making (MCDM) technique for the selection of wastewater treatment (WWT) technology for treating wastewater.

Design/methodology/approach

The proposed approach is based on Analytical Hierarchy Process (AHP) under fuzzy environment, Preference Ranking Organization METHod for Enrichment Evaluation (PROMETHEE) and hierarchy Grey Relation Analysis (GRA) techniques. Two models are proposed to evaluate the best WWT. The first model, Fuzzy Analytical Hierarchy Process (FAHP) is integrated with Preference Ranking Organization METHod for Enrichment Evaluation (PROMETHEE) technique. The second model, FAHP is integrated with hierarchy Grey Relation Analysis (GRA) technique. The Fuzzy Analytical Hierarchy Process (FAHP) is used to determine the weights of criteria and then ranking of the WWT technology is determined by PROMETHEE and GRA.

Findings

An efficient pair‐wise comparison process and ranking of alternatives can be achieved for WWT technology selection through the integration of FAHP and PROMETHEE, FAHP and GRA.

Originality/value

The paper highlights a new insight into MCDM techniques to select an optimum WWT technology selection for the paper manufacturing industry.

Details

Management of Environmental Quality: An International Journal, vol. 24 no. 5
Type: Research Article
ISSN: 1477-7835

Keywords

Article
Publication date: 4 September 2017

Zhihao Zheng, Yang Gao, Yijing Zhang and Shida Henneberry

The purpose of this paper is to analyze changes in consumers’ knowledge and acceptance of genetically modified (GM) foods over the past decade and identifies the…

Abstract

Purpose

The purpose of this paper is to analyze changes in consumers’ knowledge and acceptance of genetically modified (GM) foods over the past decade and identifies the determinants in the consumer attitudes toward GM foods in urban China.

Design/methodology/approach

The data used in this study were collected from 952 urban consumers in 2013 in 15 provinces. The ordinal logit model was chosen to identify the determinants in the consumers’ subjective knowledge and acceptance of GM foods.

Findings

Results show that the consumers’ awareness of GM foods, biotech knowledge, and subjective knowledge improved significantly, while the acceptance rate toward GM foods declined considerably from 2002 to 2013. Moreover, the consumers’ subjective knowledge of GM foods had a significantly negative impact on their acceptance rate of GM foods. Finally, the media coverage with the “event of Golden rice in 2012” as a proxy helped consumers in shaping their negative perceptions toward GM foods, suggesting that the media coverage was one of major factors in leading to the low acceptance rate of GM foods in urban China.

Originality/value

The findings of previous studies conducted in the early 2000s might not reflect current Chinese consumer attitudes because the public opinion toward GM foods in modern China has considerably changed. This study thus filled in the void by updating estimates on consumer attitudes toward GM foods and by underlining the factors that have led to the changes in consumer attitudes, using a mass survey covering Chinese urban consumers in 15 provinces in 2013.

Details

China Agricultural Economic Review, vol. 9 no. 3
Type: Research Article
ISSN: 1756-137X

Keywords

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