Evaluating the credit assessment criteria used by financiers to assess credit applications in Mozambique

Abstract

Africa is the ideal location for agricultural investment to address the growing concern of food insecurity worldwide. South African agricultural producers and agricultural financiers are strategically positioned to expand their agricultural interests into Africa, as South Africa is regarded as the gateway for investors to Africa. Expansion into Africa is regarded as high risk and to reduce the increased credit risk, agricultural financiers use credit assessment criteria when evaluating South African producers’ credit applications. The objective of this study was to identify and evaluate these credit assessment criteria to facilitate improved credit applications. The research used qualitative techniques by conducting semistructured interviews with specialist representatives from three commercial banks in Mozambique. The contribution of the study is the unveiling and evaluation of the credit assessment criteria founded on four pillars, namely financial history, cashflow repayment ability, collateral and management profile of the producer.