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

Denis Nadolnyak (Auburn University, Auburn, Alabama, USA)
Valentina Hartarska (Auburn University, Auburn, Alabama, USA)

Agricultural Finance Review

ISSN: 0002-1466

Article publication date: 7 December 2021

Issue publication date: 1 March 2022

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Abstract

Purpose

The 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/approach

Informed 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.

Findings

Access 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/value

There 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.

Keywords

Acknowledgements

Funding: This research was funded by the USDA ERS cooperative agreement [Award number: 58-600-8-0062].

Citation

Nadolnyak, D. and Hartarska, V. (2022), "Nontraditional lenders and access to local agricultural credit markets by beginning and female farmers", Agricultural Finance Review, Vol. 82 No. 2, pp. 268-284. https://doi.org/10.1108/AFR-06-2021-0073

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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