Transformation of agriculture risk management

Ahmad Raza Bilal and Mirza Muhammad Ali Baig

Agricultural Finance Review, 2018, vol. 79, issue 1, 136-155

Abstract: Purpose - The purpose of this paper is to investigate the balanced role of internal and external compliance in risk evaluation process of specialized agriculture financing. The authors examine the adaptive behavior of risk managers to determine the role of proposed transformation for risk monitoring (RM) and control process in risk mitigation and avoidance of agriculture credit failure. Design/methodology/approach - A self-administered survey was conducted to collect data from 353 risk-related officers and managers in Zarai Taraqiati Bank Limited (ZTBL) Pakistan. The authors used a previously tested scale for the main constructs. The descriptive analyses were used to gauge the model capacity for determining the strength of proposed risk patterns in agriculture risk management. Findings - The results reveal that risk evaluation process in ZTBL is reasonably efficient in mitigating risks. Given the sensitive nature of farm credit, there is a need of fundamental reforms in risk policy manuals in line with central bank’s agriculture prudential regulations and Basel-III standards. The results fully supportH1andH2, whileH3is partially validated. The result patterns indicate serious issues in risk evaluation process in agriculture finance that is causing higher delinquency in farm credit. Research limitations/implications - Based on highlighted issues, the authors recommend valuable guidelines in the RM review system for agriculture financing products at ZTBL. Practical implications - The authors propose remodeling of agriculture risk management and offer valuable insights to the agriculture financial regulators and government in taking policy initiatives in the pre-and-post agriculture risk evaluation process. The proposed model enables RM process to improve farm credit delinquency, particularly in ZTBL and other agriculture banking networks in commercial banks. Originality/value - This is the first study to empirically investigate RM evaluation process in agriculture risk management of ZTBL in Pakistan, thus, offers new horizon of farm credit regulatory compliance in agricultural sector of Pakistan.

Keywords: Basel regulations; Nonperforming loans; Agriculture risk management; Delinquency ratio; Risk evaluation process (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eme:afrpps:afr-05-2018-0038

DOI: 10.1108/AFR-05-2018-0038

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