IDEAS home Printed from https://ideas.repec.org/p/ags/gadadp/260766.html
   My bibliography  Save this paper

Can agricultural credit scoring for microfinance institutions be implemented and improved by weather data?

Author

Listed:
  • Römer, Ulf
  • Mußhoff, Oliver

Abstract

In recent years, the application of credit scoring in urban microfinance institutions became popular, while rural microfinance institutions, which mainly lend to agricultural clients, are hesitating to adopt credit scoring. The present study aims to explore whether microfinance credit scoring models are suitable for agricultural clients, and if such models can be improved for agricultural clients by accounting for precipitation.

Suggested Citation

  • Römer, Ulf & Mußhoff, Oliver, 2017. "Can agricultural credit scoring for microfinance institutions be implemented and improved by weather data?," Department of Agricultural and Rural Development (DARE) Discussion Papers 260766, Georg-August-Universitaet Goettingen, Department of Agricultural Economics and Rural Development (DARE).
    • Handle: RePEc:ags:gadadp:260766
    DOI: 10.22004/ag.econ.260766
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/260766/files/1703.pdf
    Download Restriction: no
    File URL: https://ageconsearch.umn.edu/record/260766/files/1703.pdf?subformat=pdfa
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.260766?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. DE CNUDDE, Sofie & MOEYERSOMS, Julie & STANKOVA, Marija & TOBBACK, Ellen & JAVALY, Vinayak & MARTENS, David, 2015. "Who cares about your Facebook friends? Credit scoring for microfinance," Working Papers 2015018, University of Antwerp, Faculty of Business and Economics.
    2. Steven B. Caudill & Daniel M. Gropper & Valentina Hartarska, 2009. "Which Microfinance Institutions Are Becoming More Cost Effective with Time? Evidence from a Mixture Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(4), pages 651-672, June.
    3. Huseyin Ince & Bora Aktan, 2009. "A comparison of data mining techniques for credit scoring in banking: A managerial perspective," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 10(3), pages 233-240, March.
    4. Robert Finger & Stéphanie Schmid, 2008. "Modeling agricultural production risk and the adaptation to climate change," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 68(1), pages 25-41, May.
    5. Carlos Castro & Karen Garcia, 2014. "Default risk in agricultural lending, the effects of commodity price volatility and climate," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 74(4), pages 501-521, October.
    6. Swinnen, Johan F. M. & Gow, Hamish R., 1999. "Agricultural credit problems and policies during the transition to a market economy in Central and Eastern Europe," Food Policy, Elsevier, vol. 24(1), pages 21-47, February.
    7. Weber, Ron & Mußhoff, Oliver & Petrick, Martin, 2014. "How flexible repayment schedules affect credit risk in agricultural microfinance," DARE Discussion Papers 1404, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    8. Benjamin Collier & Ani L. Katchova & Jerry R. Skees, 2011. "Loan portfolio performance and El Niño, an intervention analysis," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 71(1), pages 98-119, May.
    9. Erica Field & Rohini Pande, 2008. "Repayment Frequency and Default in Microfinance: Evidence From India," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 501-509, 04-05.
    10. Shahidur R. Khandker & Gayatri B. Koolwal, 2016. "How has microcredit supported agriculture? Evidence using panel data from Bangladesh," Agricultural Economics, International Association of Agricultural Economists, vol. 47(2), pages 157-168, March.
    11. Pelka, Niels & Weber, Ron & Musshoff, Oliver, 2015. "Does weather matter? How rainfall shocks affect credit risk in agricultural micro-finance," 2015 Conference, August 9-14, 2015, Milan, Italy 212617, International Association of Agricultural Economists.
    12. Barry J. Barnett & Olivier Mahul, 2007. "Weather Index Insurance for Agriculture and Rural Areas in Lower-Income Countries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(5), pages 1241-1247.
    13. Dercon, Stefan, 2004. "Growth and shocks: evidence from rural Ethiopia," Journal of Development Economics, Elsevier, vol. 74(2), pages 309-329, August.
    14. Francesc Prior & Antonio Argandoña, 2009. "Best Practices in Credit Accessibility and Corporate Social Responsibility in Financial Institutions," Journal of Business Ethics, Springer, vol. 87(1), pages 251-265, April.
    15. D. J. Hand & W. E. Henley, 1997. "Statistical Classification Methods in Consumer Credit Scoring: a Review," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 160(3), pages 523-541, September.
    16. Heß, Sebastian & Bergmann, Holger & Sudmann, Lüder, 2006. "Die Förderung alternativer Energien - eine kritische Bestandsaufnahme," 54th Annual Conference, Goettingen, Germany, September 17-19, 2014 187446, German Association of Agricultural Economists (GEWISOLA).
    17. Abhijit Banerjee & Esther Duflo & Rachel Glennerster & Cynthia Kinnan, 2015. "The Miracle of Microfinance? Evidence from a Randomized Evaluation," American Economic Journal: Applied Economics, American Economic Association, vol. 7(1), pages 22-53, January.
    18. de Nicola, Francesca, 2015. "Handling the weather : insurance, savings, and credit in West Africa," Policy Research Working Paper Series 7187, The World Bank.
    19. A?da Kammoun & Imen Triki, 2016. "Credit Scoring Models for a Tunisian Microfinance Institution: Comparison between Artificial Neural Network and Logistic Regression," Review of Economics & Finance, Better Advances Press, Canada, vol. 6, pages 61-78, February.
    20. Weber, Ron & Mußhoff, Oliver & Petrick, Martin, 2014. "How flexible repayment schedules affect credit risk in agricultural microfinance," DARE Discussion Papers 1404, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    21. Fernando, Nimal A., 2007. "Managing Microfinance Risks: Some Observations and Suggestions," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 4(2), pages 1-22, December.
    22. Beatriz Armendáriz de Aghion & Jonathan Morduch, 2000. "Microfinance Beyond Group Lending," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 401-420, July.
    23. Minten, Bart & Randrianarison, Lalaina & Swinnen, Johan F.M., 2009. "Global Retail Chains and Poor Farmers: Evidence from Madagascar," World Development, Elsevier, vol. 37(11), pages 1728-1741, November.
    24. Niels Pelka & Oliver Musshoff & Ron Weber, 2015. "Does weather matter? How rainfall affects credit risk in agricultural microfinance," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 75(2), pages 194-212, July.
    25. Jochen Meyer & Stephan von Cramon‐Taubadel, 2004. "Asymmetric Price Transmission: A Survey," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(3), pages 581-611, November.
    26. Ron Weber & Oliver Musshoff, 2012. "Is agricultural microcredit really more risky? Evidence from Tanzania," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 72(3), pages 416-435, November.
    27. Dinh, Thi Huyen Thanh & Kleimeier, Stefanie, 2007. "A credit scoring model for Vietnam's retail banking market," International Review of Financial Analysis, Elsevier, vol. 16(5), pages 471-495.
    28. Joris Van Gool & Wouter Verbeke & Piet Sercu & Bart Baesens, 2012. "Credit scoring for microfinance: is it worth it?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 17(2), pages 103-123, April.
    29. Solène Morvant-Roux, 2011. "Is Microfinance the Adequate Tool to Finance Agriculture?," World Scientific Book Chapters, in: Beatriz Armendáriz & Marc Labie (ed.), The Handbook Of Microfinance, chapter 20, pages 421-436, World Scientific Publishing Co. Pte. Ltd..
    30. Copestake, James, 2007. "Mainstreaming Microfinance: Social Performance Management or Mission Drift?," World Development, Elsevier, vol. 35(10), pages 1721-1738, October.
    31. Heß, Sebastian & Bergmann, Holger & Sudmann, Lüder, 2006. "Die Förderung alternativer Energien - eine kritische Bestandsaufnahme," Department of Agricultural and Rural Development (DARE) Discussion Papers 187446, Georg-August-Universitaet Goettingen, Department of Agricultural Economics and Rural Development (DARE).
    32. Ernst Berg & Bernhard Schmitz, 2008. "Weather‐based instruments in the context of whole‐farm risk management," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 68(1), pages 119-133, May.
    33. Nimal A. Fernando, 2007. "Managing Microfinance Risks: Some Observations and Suggestions," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 4(2), pages 1-21, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Warda Najeeb Jamal & Rana M. Zahid Hafeez & Owais Shafique & Razi Razzaq & Gulfam Asif & Muhammad Waqas Ashraf, 2021. "Impact Of Microcredit Finance On The Socioeconomic Status Of The Underprivileged Populace Of Punjab: Through The Mediating Effect Of Knowledge Sharing Ability And Financial And Legal Awareness," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 10(4), pages 113-125, December.
    2. Oliynyk, Oleksandr & Makohon, Vitaliy & Mishchenko, Vitaliya & Brik, Svitlana, 2020. "Ефективність Витрат На Впровадження Нових Сортів І Гібридів У Рослинництві," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 6(4), December.
    3. Narayan Prasad Nagendra & Gopalakrishnan Narayanamurthy & Roger Moser, 2022. "Satellite big data analytics for ethical decision making in farmer’s insurance claim settlement: minimization of type-I and type-II errors," Annals of Operations Research, Springer, vol. 315(2), pages 1061-1082, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Römer, Ulf & Weber, Ron & Mußhoff, Oliver & Turvey, Calcum G., 2017. "Truth and consequences: Bogus pipeline experiment in informal small business lending," DARE Discussion Papers 1702, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    2. Ölkers, Tim & Liu, Shuang & Mußhoff, Oliver, 2023. "A typology of Malian farmers and their credit repayment performance - An unsupervised machine learning approach," 97th Annual Conference, March 27-29, 2023, Warwick University, Coventry, UK 334547, Agricultural Economics Society - AES.
    3. Weber, Ron & Mußhoff, Oliver & Petrick, Martin, 2014. "How flexible repayment schedules affect credit risk in agricultural microfinance," Department of Agricultural and Rural Development (DARE) Discussion Papers 187434, Georg-August-Universitaet Goettingen, Department of Agricultural Economics and Rural Development (DARE).
    4. Nicolás de Roux, 2020. "Weather Variability, Credit Scores and Access to Credit: Evidence from Colombian Coffee Farmers," Documentos CEDE 17800, Universidad de los Andes, Facultad de Economía, CEDE.
    5. Matthias Buchholz & Oliver Musshoff, 2021. "Tax or green nudge? An experimental analysis of pesticide policies in Germany [A psychological study of the inverse relationship between perceived risk and perceived benefit]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 48(4), pages 940-982.
    6. Rozzani, Nabilah & Mohamed, Intan Salwani & Syed Yusuf, Sharifah Norzehan, 2017. "Risk management process: Profiling of islamic microfinance providers," Research in International Business and Finance, Elsevier, vol. 41(C), pages 20-27.
    7. Vollmer, Teresa & von Cramon-Taubadel, Stephan, 2019. "The influence of Brazilian exports on price transmission processes in the coffee sector: a Markov-switching approach," Department of Agricultural and Rural Development (DARE) Discussion Papers 291497, Georg-August-Universitaet Goettingen, Department of Agricultural Economics and Rural Development (DARE).
    8. Gutiérrez-Nieto, Begoña & Serrano-Cinca, Carlos, 2019. "20 years of research in microfinance: An information management approach," International Journal of Information Management, Elsevier, vol. 47(C), pages 183-197.
    9. Weber, Ron & Mußhoff, Oliver & Petrick, Martin, 2014. "How flexible repayment schedules affect credit risk in agricultural microfinance," DARE Discussion Papers 1404, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    10. Elisabeth Vollmer & Daniel Hermann & Oliver Musshoff, 2019. "The disposition effect in farmers’ selling behavior: an experimental investigation," Agricultural Economics, International Association of Agricultural Economists, vol. 50(2), pages 177-189, March.
    11. Carlos Serrano-Cinca & Begoña Gutiérrez-Nieto & Nydia M. Reyes, 2013. "A Social Approach to Microfinance Credit Scoring," Working Papers CEB 13-013, ULB -- Universite Libre de Bruxelles.
    12. Möllmann, Johannes & Buchholz, Matthias & Kölle, Wienand & Musshoff, Oliver, 2020. "Do remotely-sensed vegetation health indices explain credit risk in agricultural microfinance?," World Development, Elsevier, vol. 127(C).
    13. Turvey, C. G., 2017. "IFAD RESEARCH SERIES 10 - Inclusive finance and inclusive rural transformation," IFAD Research Series 280048, International Fund for Agricultural Development (IFAD).
    14. Christian Kurniawan & Xiyu Deng & Adhiraj Chakraborty & Assane Gueye & Niangjun Chen & Yorie Nakahira, 2022. "A Learning and Control Perspective for Microfinance," Papers 2207.12631, arXiv.org, revised Dec 2022.
    15. Busse, Stefan & Brümmer, Bernard & Ihle, Rico, 2010. "Interdependencies between fossil fuel and renewable energy markets: the German biodiesel market," DARE Discussion Papers 1010, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    16. Simon Gollisch & Barbara Hedderich & Ludwig Theuvsen, 2016. "Reference points and risky decision-making in agricultural trade firms: A case study in Germany," Department of Agricultural and Rural Development (DARE) Discussion Papers 260773, Georg-August-Universitaet Goettingen, Department of Agricultural Economics and Rural Development (DARE).
    17. Gregor Dorfleitner & Eva‐Maria Oswald, 2016. "Repayment behavior in peer‐to‐peer microfinancing: Empirical evidence from Kiva," Review of Financial Economics, John Wiley & Sons, vol. 30(1), pages 45-59, September.
    18. Li, Lin Yang & Hermes, Niels & Meesters, Aljar, 2019. "Convergence of the performance of microfinance institutions: A decomposition analysis," Economic Modelling, Elsevier, vol. 81(C), pages 308-324.
    19. Pelka, Niels & Weber, Ron & Musshoff, Oliver, 2015. "Does weather matter? How rainfall shocks affect credit risk in agricultural micro-finance," 2015 Conference, August 9-14, 2015, Milan, Italy 212617, International Association of Agricultural Economists.
    20. Jiali Jenna Tang & Shakil Quayes & George Joseph, 2020. "Microfinance institutions, financial intermediation and the role of deposits," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(2), pages 1635-1672, June.

    More about this item

    Keywords

    Agricultural Finance; Farm Management;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:gadadp:260766. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/iagoede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.