Factors affect Credit Risk of Loans Awarded to Saffron Producers

Among the risks that threaten banks and financial institutions, credit risk is the most important risk due to its centrality, volume of operation and especially its sensitivity. Due to the lack of proper transportation equipment and communication infrastructure and the need to manager water resources and initial capital for advertising and packaging, a major part of Saffron producers in the northeast of the country and especially Zaveh city in Khorasan Razavi province, use banking facilities to provide floating capital. However, for reasons that cause agricultural risk, part of the facilities granted to them is not returned every year and causes the risk of non-repayment for the bank. Accordingly, the aim of this research is to measure the credit risk of facilities granted to Saffron producers in Zaveh city. Examined information is related to 16.000 real customers from three branches of Keshavarzi bank located in Zaveh city from the beginning of 2017 to the end of 2019, which has been analyzed using the Logit model. According to the results, it can be said that specialization of loans in the agricultural sector, payment to technical and trained people and non-renewal of these facilities on time, along with better follow-up and supervision can improve credit risk efficiency. Also, due to the greater impact of financial characteristics than personal characteristics in customer default, getting closer to Islamic banking in which the bank is the partner of facilities in economic activities and the individual's contribution is considered as a guarantee, may better cover credit risks while freeing the core collateral to select better customers.