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Analysing social attributes of loan default among small Indian Dairy farms: A discriminating approach

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  • Sinha, Mukesh Kumar
  • Dhaka, J. P.
  • Mondal, B.
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    Abstract

    The study examines the socio-economic factors discriminating defaulters and non-defaulters of credit repayment. Multi-stage sampling design was adopted for selection of farm respondents. The data were collected through structured questionnaire by personal interview method. A linear discriminant function considered to examine the relative importance of different factors in discriminating between non-defaulters and defaulters. The result revealed that per capita income from crop and milk production, expenditure to total income, earning adults and off-farm income explained major share in discriminating the non-defaulters from defaulters. The mean discriminant score for the non-defaulters (Z1) and defaulter (Z2) were found to be 0.316 and -1.322, respectively. The critical mean discriminant score (Z) for the two groups was found to be –0.503. The high value of Z corresponds to non-defaulter and low value to defaulter. Later the derived classification analysis was observed that 50 out of 83 defaulters and 32 out of 37 non-defaulters were rightly classified in Z function. Thus, grouped cases classified correctly as 68.33% as factors of default. Hence, the model is found to be valid to predict whether an unknown borrower is likely to be defaulter or non-defaulter more precisely.

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    File URL: http://mpra.ub.uni-muenchen.de/53362/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 53362.

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    Date of creation: 04 Dec 2013
    Date of revision: 20 Jan 2014
    Publication status: Published in Scientific Research and Essay 2.9(2014): pp. 2354-2358
    Handle: RePEc:pra:mprapa:53362

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    Keywords: Discriminant function; credit; defaulter and dairy farmers;

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    1. S. Gandhimathi, 2012. "Determinants of repayment and overdues in agricultural sector," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 4(5), pages 590-602.
    2. Arindam Bandyopadhyay, 2006. "Predicting probability of default of Indian corporate bonds: logistic and Z-score model approaches," Journal of Risk Finance, Emerald Group Publishing, vol. 7(3), pages 255-272, May.
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