Nontraditional lenders and access to local agricultural credit markets by beginning and female farmers

Abstract

PurposeThe purpose of this study is to evaluate if access to local branch infrastructure of the farm credit system institutions (FCS), banks and credit unions (BCU), and alternative financial services (AFS) providers is related to the use of credit from non-traditional lenders (NTLs). The focus is on beginning and women operators who are typically credit constrained and thus more likely to suffer from closures of bank branches and consolidation of traditional agricultural lenders.Design/methodology/approachInformed by Detragiache et al. (2000), the authors specify farmers’ use of loans as a function of their access to credit (measured by the branch density of each lender type) along with operator’s and operation’s controls. The measures of loans by NTLs (number, use, share and lender type) require the use of Poisson, Probit, Tobit and Multinomial Logit techniques. This study utilizes individual producer data from the 2018 Agricultural Resource Management Survey and 2018 county-level branch density data for FCS, BCU and AFS providers.FindingsAccess to credit from FCS is helpful to BFRs only, while access to AFS is associated with the use of loans from NTLs by women but not by BFRs. As expected, access to BCU credit matters for the use of loans from NTLs, with a complementary effect for BFRs but a substitution effect for women’s use of such loans.Originality/valueThere are no studies on local agricultural credit markets in the US that evaluate the implications from changes in access to credit on credit-constrained borrowers and their use of NTLs’ credit.

Determinants of Demand and Participation by Poultry Farmers in Formal and Informal Credit Markets in Cross River State, Nigeria

“…For instance, Doss et al (2018) in Ethiopia found that social networks and trust played a critical role in farmers' decisions to access informal credit. Similarly, Agbola et al (2022) revealed that factors such as social capital, informal savings groups, and cultural norms significantly influenced farmers' participation in informal credit markets in Nigeria. Similarly, Alemayehu et al (2020) in Ethiopia and Murendo et al (2021) in Zimbabwe highlighted the importance of social networks and trust in facilitating farmers' participation in informal credit markets.…”

Women farmers and community well‐being under modeling uncertainty

“…The authors attribute this income disparity to differences in resources, experience, and commodity production choices. Nadolnyak and Hartarska (2021) analyzed the local agricultural credit market and how female farmers' access to financial services impacts their use of credit. They find that “[w]hile access to farm credit institutions is not associated with their use of loans, access to both alternative financial services and banks and credit union options inform their borrowing choices and loans from non‐traditional lenders and banks and credit unions may be substitutes but loans from non‐traditional lenders remain a smaller part of women's loan portfolios” (Nadolnyak & Hartarska, 2021, p. 14).…”

“…Nadolnyak and Hartarska (2021) analyzed the local agricultural credit market and how female farmers' access to financial services impacts their use of credit. They find that “[w]hile access to farm credit institutions is not associated with their use of loans, access to both alternative financial services and banks and credit union options inform their borrowing choices and loans from non‐traditional lenders and banks and credit unions may be substitutes but loans from non‐traditional lenders remain a smaller part of women's loan portfolios” (Nadolnyak & Hartarska, 2021, p. 14). Therefore, faced with these challenges and given their unique goals, women farmers operate smaller farms, focus on livestock and horticultural operations, and emphasize direct‐to‐consumer sales.…”

Guest editorial: Nontraditional Credit in U.S. Agriculture

“…Nadonlyk and Hartarska (2022) also use ARMS data in their study on “Nontraditional lenders and access to local agricultural credit markets by beginning and female farmers.” They link the farms sampled in ARMS to county-level branch density of Farm Credit System, banks and credit unions and alternative financial services [3]. They then use several econometric models to regress different loan outcomes on credit access.…”

“…3. Nadonlyk and Hartarska (2022) define alternative financial services as “AFS are financial services provided outside traditional banking institutions and proxy here for the insufficient banking services in the county […] AFS include rent-to own agreements, pawnshops, refund anticipation loans, some subprime mortgage loans, car title loans, payday loans and private moneylenders.”…”