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Sustainability 2016, 8(1), 77; doi:10.3390/su8010077

Determinants of Financial Sustainability for Farm Credit Applications—A Delphi Study

Department Agricultural Economics, University of the Free State, 205 Nelson Mandela ave, Bloemfontein 9301, South Africa
These authors contributed equally to this work.
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Author to whom correspondence should be addressed.
Academic Editor: Manfred Max Bergman
Received: 9 November 2015 / Revised: 6 January 2016 / Accepted: 6 January 2016 / Published: 14 January 2016
(This article belongs to the Special Issue 5th World Sustainability Forum - Selected Papers)
View Full-Text   |   Download PDF [205 KB, uploaded 14 January 2016]

Abstract

Farmers use credit from commercial credit providers to finance production activities. Commercial credit providers have to predict the financial sustainability of the enterprise to ensure that the borrower will have the ability to repay the loan. A Delphi study was conducted to explore what factors are used as indicators of loan-repayment ability of farmers. The objective was not only to identify factors that are currently considered, but also to identify other personal attributes that may improve the accuracy in predicting the repayment ability of potential borrowers. The Delphi was applied to a panel consisting of nine credit analysts and credit managers from a commercial credit provider in South Africa. The results indicate that the current and past financial performance, account standing, collateral, and credit record of the farm are very important in the assessment of applications in terms of financial performance. Experience and the success factors compared to competitors were found to be important, while age and education/qualification are regarded as less important in predicting repayment ability. The results also show that, although not currently objectively included in credit evaluations, credit analysis regards leadership and human relations; commitment and confidence; internal locus of control; self-efficacy; calculated risk taking; need for achievement; and opportunity seeking as important indicators of the ability of potential borrows to repay their loans. Thus, credit analysts and managers also regard management abilities and entrepreneurial characteristics of potential borrowers to be good indicators of repayment ability. Results from this research provide new indicator factors that can be used to extend existing credit evaluation instruments in order to more accurately predict repayment ability. View Full-Text
Keywords: financial sustainability; credit repayment ability; delphi technique; personal attributes financial sustainability; credit repayment ability; delphi technique; personal attributes
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Henning, J.I.F.; Jordaan, H. Determinants of Financial Sustainability for Farm Credit Applications—A Delphi Study. Sustainability 2016, 8, 77.

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