Risk Management Practices in Agricultural Financing in Developing Countries: Experience from Selected Commercial Banks in Tanzania
Loading...
Date
2021
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
This study examines risk management tools to mitigate agricultural financing risks.
The study analyses risks that lenders face, tools for managing the risks and the
correlation between agricultural lending and risk mitigation tools. The used data
come from a sample of 55 employees from three selected banks, which is analysed using
frequency tables and Chi-square. The findings show that banks face production risks
in terms of variability in outputs due to drought and diseases. Tools for managing the
risks include collateral, appraisal techniques, diversification of agricultural activities,
group liability, guarantee/cash deposits, loan structuring and warehouse receipts.
The Chi-square test finds a correlation between risk mitigation tools and agricultural
lending; hence, mitigation tools enhance lending to the agricultural sector. Therefore,
to manage agricultural risks, banks should deploy these tools optimally. Additionally,
exposing farmers to free market practices will enable them to cover costs of their
operations, and to repay the loans.
Description
Keywords
risk management practices, agricultural financing, mitigation tools