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Credit Risk Assessment and Racial Minority Lending at the Farm Service Agency

Published online by Cambridge University Press:  28 April 2015

Cesar L. Escalante ,
Rodney L. Brooks ,
James E. Epperson  and
Forrest E. Stegelin
Cesar L. Escalante
Affiliation:
Department of Agricultural and Applied Economics of the University of Georgia
Rodney L. Brooks
Affiliation:
Department of Agricultural and Applied Economics of the University of Georgia
James E. Epperson
Affiliation:
Department of Agricultural and Applied Economics of the University of Georgia
Forrest E. Stegelin
Affiliation:
Department of Agricultural and Applied Economics of the University of Georgia
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Abstract

The nature of credit risk assessment and basis of loan approval decisions of the Farm Service Agency are analyzed in the aftermath of the black farmers' 1997 class action suit against the U.S. Department of Agriculture. This study did not uncover convincing evidence of racial discrimination against nonwhite borrowers under a binomial logistic framework based on the probability of a loan application's approval. Moreover, the collective use of more stringent and objective credit-scoring measures usually employed by commercial lenders is less evident in the Farm Service Agency's evaluation of loan applications.

Keywords

binomial logistic regressioncredit riskcredit-scoring modeldirect lendingFarm Service Agencyguaranteed lendingracial biasG20G21G28Q10Q14
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 38 , Issue 1 , April 2006 , pp. 61 - 75
Copyright
Copyright © Southern Agricultural Economics Association 2006

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