Farm credit member‐borrowers' preferences for patronage payments

Abstract

Purpose

Many associations in the Farm Credit System, which are financial cooperatives, pay their member‐borrowers a cash patronage payment based on the amount of loan volume with the association. In today's competitive lending environment, some Farm Credit associations have offered lower interest rates on new loans but these new member‐borrowers have to forgo their cash patronage payment to receive this new, lower‐interest rate loan. The purpose of this paper is to identify Farm Credit member‐borrowers' preferences for patronage refunds received as a cash payment versus lower fixed real estate interest rates.

Design/methodology/approach

Preferences for patronage refunds or lower fixed interest rates are elicited from Farm Credit Services of East Central Oklahoma member‐borrowers via conjoint analysis.

Findings

Results show that member‐borrowers strongly prefer patronage refunds compared to lower fixed interest rates.

Originality/value

This paper fulfills a need to better understand patronage refund programs within the Farm Credit System.

Citation

Briggeman, B. and Jorgensen, Q. (2009), "Farm credit member‐borrowers' preferences for patronage payments", Agricultural Finance Review, Vol. 69 No. 1, pp. 88-97. https://doi.org/10.1108/00021460910960480