AGRICULTURAL CREDIT RISK AND ITS MACROECONOMIC DETERMINANTS

Abstract

Agricultural credit plays an important role in supporting farm production, agricultural investment, rural employment, and food security. However, lending to the agricultural sector involves specific risks arising from production uncertainty, seasonal income patterns, market price fluctuations, and borrowers’ exposure to adverse economic conditions. Macroeconomic instability may further affect farmers’ repayment capacity and the quality of agricultural loan portfolios. This study aims to examine the macroeconomic determinants of agricultural credit risk, focusing on economic growth, inflation, exchange rate movements, unemployment, and agricultural production growth. Agricultural credit risk is proposed to be measured using the non-performing loan (NPL) ratio for agricultural loans. The research adopts a quantitative approach based on secondary data obtained from official statistical and financial institutions, subject to data availability. A multiple regression model is proposed to investigate the relationships between the selected macroeconomic indicators and agricultural credit risk. The study also considers the potential implications of agricultural credit risk for financial stability, farm investment, and sustainable agricultural development. The expected contribution is a sector-specific analytical framework that connects macroeconomic conditions with agricultural lending performance. The direction and magnitude of the relationships will be established through empirical analysis rather than assumed in advance. The practical implications may support agricultural credit risk assessment, early-warning systems, and evidence-based lending policies.