Godwin Chigozie Okpara, Ibeleme, Sylvester NO and Odionye, Joseph Chukwudi
This study was designed to investigate the repayment performance of smallholder oil palm producers and processors in Abia State using a credit rating approach. The aim was to develop scoring indexes that will enable the researcher classify the study group as either credit worthy or non-credit worthy using some hypothesized variables as determinants of group membership. Ninety (90) respondents, comprising 54 producers and 36 processors were randomly selected and interviewed. The discriminant analysis technique was employed in analyzing the data and drawing conclusions. In rating the beneficiaries, the scoring index developed identified twenty seven percent of the processors as not being qualified as the model captured only fourteen processors as credit worth as against twenty two processors using repayment rates. The discriminant analysis had high level of accuracy in the error analysis with the group centroid of non- credit worthy respondents being 1.742 while that of the credit worthy group was – 1.216. Using Fisher’s function coefficients , data analysis showed that loan-asset ratio ranks top as the most critical positive discriminating variable for credit worthiness, followed by interest rate, income – expenditure ratio and age of beneficiaries as these variables crossed the 1 unit credit worthiness benchmark. The Eigen Value Test used to check the relative importance of the discriminating variables in determining group membership was significant at 2.167 (>1). This means that there exist strong relationship between the discriminant functions and the group variables in classifying the respondents into credit worthy and non-credit worthy groups using the theorized variables.
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