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Some Evidence on the Relationship Between Loan Insurance and the Supply of Agricultural Credit From Commercial Banks

Published online by Cambridge University Press:  28 April 2015

L. Upton Hatch  and
Wesley N. Musser
L. Upton Hatch
Affiliation:
Department of Agricultural Economics, University of Georgia, Athens, Department of Agricultural and Applied Economics, University of Minnesota
Wesley N. Musser
Affiliation:
Department of Agricultural and Applied Economics, University of Minnesota, and, Department of Agricultural Economics, University of Georgia at Athens
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Extract

Insured farm loans have evolved to be an important component of the federal role in the agricultural credit subsector. Currently, agricultural credit is supplied by three sets of institutions: (1) private firms and individuals, (2) the quasiprivate cooperative Farm Credit System, and (3) the federal public programs of the Farmers Home Administration (FmHA) and Small Business Administration. Statuatory authority currently limits federal programs to a residual role of lending to borrowers who cannot receive credit from the other segments. Though a large component of public programs consists of emergency loans in areas of economic disaster, the FmHA also makes farm operating and real estate loans to farmers who meet the statuatory requirements. The source of funds for some FmHA loans is federal appropriations and money market certificates. However, guaranteed loans have become an important component of FmHA programs. These loans are made in cooperation with other agricultural finance agencies. The public agency insures or guarantees repayment of the loan. The cooperating firm negotiates the loan and provides the funds. Usually the interest payment is below the current market interest rate structure.

Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 12 , Issue 2 , December 1980 , pp. 25 - 29
Copyright
Copyright © Southern Agricultural Economics Association 1980

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