FSA direct loan targeting: successful and financially necessary?

Abstract

The Farm Service Agency (FSA) direct farm loan program provides credit to family‐sized farms including those operated by beginning farmers and socially disadvantaged applicants. Approximately 37% of all U.S. farms are estimated to be eligible for FSA direct loans when farm size, credit needs, farming experience, and occupation are taken into account. However, market penetration rates for various borrower cohorts range from 0.8% to 4.6% for FY 2000S2003. In general, beginning farmers have weaker financial characteristics than non‐beginning farmers. Yet, the same result is not found when comparing socially disadvantaged farmers with non‐socially disadvantaged farmers, such that there are few significant differences or the differences in financial characteristics are mixed. Overall, results indicate FSA direct farm loan borrowers have weaker financial characteristics than eligible, non‐FSA direct farm loan borrowers, implying FSA is serving farmers likely to be denied credit by commercial lenders.

Citation

Nwoha, O.J., Ahrendsen, B.L., Dixon, B.L., Settlage, D.M. and Chavez, E.C. (2007), "FSA direct loan targeting: successful and financially necessary?", Agricultural Finance Review, Vol. 67 No. 1, pp. 35-53. https://doi.org/10.1108/00214660780001196