Academic journal article Iranian Journal of Management Studies

Investigating the Effect of Selected Sustainable Development Indicators on Credit Allocation: The Case of National Development Fund of Iran

Academic journal article Iranian Journal of Management Studies

Investigating the Effect of Selected Sustainable Development Indicators on Credit Allocation: The Case of National Development Fund of Iran

Article excerpt

(ProQuest: ... denotes formulae omitted.)

Introduction

Credit allocation focuses mainly on the allocation of credit to applicants, which together precipitates a portfolio of loans. Portfolio selection has attracted considerable attention for decades. Markowitz as a beginner introduced the portfolio problem as an optimization problem (Selection & Diversification, 1952). The main focus of his theory was diversification of assets and a tradeoff between risk and return based on the risk appetite of the investor. There are some major limitations for the application of Markowitz model to the real world. Its sensitivity to perturbations and real world constraints are the major issues (Sadjadi et al., 2012). Through the year the Markowitz model has expanded and additional real world constraints including limitations on the number of assets and bounding of the lower and upper proportion of each asset has been added to the basic model (Chang et al., 2000; Anagnostopoulos & Mamanis, 2011). This model is called cardinality constraint mean-variance portfolio optimization model. These kind of problems which is of feasible space, is changed into a non-convex region and it can also be shown that it belongs to NP-hard problems (Crama & Schyns, 2003; Shaw et al., 2008; Anagnostopoulos & Mamanis, 2011).

There are also many methods which have been introduced to solve the portfolio problem in recent years. Metaxiotis and Liagkouras investigated different multi-objective evolutionary algorithms for portfolio management including Vector Evaluation Genetic Algorithm (VEGA), Niched Pareto Genetic Algorithm (NPGA), Niched Pareto Genetic Algorithm II (NPGA-II), Non-dominated Sorting Genetic Algorithm (NSGA), Non-dominated Sorting Genetic Algorithm II (NSGA-II), Multi-Objective Genetic Algorithm (MOGA), Strength Pareto Evolutionary Algorithm (SPEA), Strength Pareto Evolutionary Algorithm II (SPEA-II), Pareto Archived Evolutionary Strategy (PAES), Pareto Envelope-based Selection Algorithm (PESA) and Pareto Envelope-based Selection Algorithm II (PESA-II) (Metaxiotis & Liagkouras, 2012). There are also mathematical models introduced to solve the model. One of the methods for portfolio selection is by using fuzzy mathematical programming. Non-linear S-shape membership functions for investors aspiration level is introduced and used for a multi-objective portfolio of maximizing short and long term return, dividend and liquidity while minimizing risk (Gupta et al., 2008).

Sustainable Development

Economic development has different challenges and effects on the social, environmental and different aspects of human life. Sustainable development is a theory and philosophy aimed at overcoming and managing the challenges of economic development. The focus is on countries, especially the developing ones. Sustainable development is a widely used phrase, it has many different meanings and therefore faced with many different responses (Dev, 2005). It strongly links and represents compatible development of environmental and socio-economic issues and can be explained in terms of economic, ecological, social and institutional sub-systems (Dev, 2005). Each of the sub-system can be represented by different group of indicators. Some of the indicators of the sub-systems can be found on (Ivanovic et al., 2009). Implementation of sustainable development issues is mostly the exclusive preserve of governments and it's always a case of contradiction between sub-systems. For example, a significant negative correlation between ecological and economic sub-system indicators has been shown and proven (Golusin et al., 2011). There are also many other indicators in literatures to evaluate the sustainability of development. 440 indicators have been introduced for different sub-systems of sustainable development by the work done by the United Nations department of Economic and Social Affairs (Economic & Social Affairs, 2001). There are also other studies which introduced the indicators for special vertical industries, for example, the energy sector (Streimikiene et al. …

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