University of Khartoum

Acomperative Study Of Loan Repayment& Collection Effeciency between Agricultural and Industerial Loans

Acomperative Study Of Loan Repayment& Collection Effeciency between Agricultural and Industerial Loans

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Title: Acomperative Study Of Loan Repayment& Collection Effeciency between Agricultural and Industerial Loans
Author: Mohamed, Nadir Eisa Elshareif
Abstract: The thesis studied factors that make collection efficiency of agricultural loans lower than the industrial sector .It takes variables affecting collection operation including the personal characteristics, natural conditions like climatic factors, pests and diseases in addition to variables affecting the production unit. Eight branches out of twenty eight working branches of Farmers commercial Bank (FCB), had been chosen to analyze their collection operation and the results obtained assesses the bad collection of agricultural loans compared to the industrial. The method of Percentage of arrears (PA) is used for calculation of collection efficiency; whenever the percentage of arrears increases, the collection efficiency decreases. This method is chosen among other methods because it is found to be the most optimal. The descriptive method and chi square technique had been used to find the significance of correlation between 61 variables and the collection efficiency. The results showed that 12 variables have a significant correlation to collection efficiency ranging from strong to weak co-relation. The study found that the correlation between banks related variables and that related to farmers have the same correlation but variables related to the production operation have a high significance; factors related to production are the main reasons for bad collection efficiency in agriculture, and this is due to high risk. Marketing is found to be the main cause of bad collection efficiency in industry. Banks also have a role in deteriorating the collection efficiency because of bad management which attributed to lack of training monitoring and follow up of the credit.. Variables that cause bad collection efficiency in the agricultural sector are: indirect management of the project. They are not attributed to the project. Their guarantees are weak. Labor wages are high. Products price are low. They sell their produce at farm gate price . Loans are not sufficient and not issued at time. They have poor or no feasibility studies for the projects to be financed. Loan period is short enough to give the farmer a time to market his crop. In addition to bad management of the staff on monitoring and follow-up. Treatment of defaults and absence of extension the banks to provide farmers with better use of the loan. Variables that cause bad collection efficiency on the industrial sector could be summarized in poor marketing policy,, high taxes, fees and levis. The study recommended the importance of the feasibility study of the project that need to be financed as a pre requisite for the loan approval. Moreover an application of an advised technical package from the research institutions through the extension services to improve the agricultural productivity which help in the loan repayment. In addition to that an effective marketing system by establishing marketing boards, provision of storage and storage facilities will help in creating a suitable environment of collection efficiency central markets and provision of storage and transport facilities. The study also recommended a program of capacity building for the bank staff in the lending, follow up and collection operation particularly follow-up operations. The Islamic modes to be applied in agricultural finance must be carefully chosen. The study preferred Musharaka mode yet in case of Murabaha the study prefer it in kind rather than in cash. Moreover the issuing of the credit has to be in a cash flow schedule according to the agricultural operation. Last but not the least the study recommended the use of an effective insurance system to cover the agriculture credit and the product. . An audited budget or balance sheet or assets and liabilities statement must be provided because there are many indications that could be extracted from these documents such as cash flow. Finally the study recommended the use of an effective agricultural insurance system to recover risks that faces agricultural activities.
Description: 209 Pages
URI: http://khartoumspace.uofk.edu/handle/123456789/13385
Date: 2015-06-17


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