Factors study of credit risks of farmer loans based on projection pursuit

Abstract

Because farmer loans have some features including a small amount loan, incomplete financial information, and large mobility, establishing a credit risk evaluation model that reflects characteristics of farmer loans has great significance for risk management of commercial banks. This paper uses projection pursuit model to nonlinearly transform multiple evaluation indicators into a single indicator of credit risk, establishes measure model of credit risk for farmer loans. Moreover, the greater squared value of projection weights, the greater impact on credit risk for farmer loans. So this paper makes use of squared value of projection weights to obtain effect sizes of risk factors. The results show that the skills of lenders and their families have the largest effect on credit risk for farmer loans.