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


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  • Escalante, Cesar L.
  • Brooks, Rodney L.
  • Epperson, James E.
  • Stegelin, Forrest E.


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.

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Bibliographic Info

Article provided by Southern Agricultural Economics Association in its journal Journal of Agricultural and Applied Economics.

Volume (Year): 38 (2006)
Issue (Month): 01 (April)

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Handle: RePEc:ags:joaaec:43749

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Keywords: binomial logistic regression; credit risk; credit-scoring model; direct lending; Farm Service Agency; guaranteed lending; racial bias; Agricultural Finance; Risk and Uncertainty; G20; G21; G28; Q10; Q14;

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  1. Ellinger, Paul N. & Gustafson, Cole R. & Hanson, Gregory D. & LaDue, Eddy L. & Barry, Peter J. & Splett, Nate & Hanson, Steven D., 1991. "Credit Evaluation Procedures at Agricultural Banks," Proceedings: 1991 Regional Committee NC-161, September 23-24, 1991, St. Louis, Missouri 130939, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
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Cited by:
  1. Wu, Ya & Escalante, Cesar L. & Gunter, Lewell F. & Epperson, James E., 2009. "A Decomposition Approach To Analyzing Racial And Gender Biases," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49308, Agricultural and Applied Economics Association.
  2. Landerito, Aiko O. & Dixon, Bruce L. & Ahrendsen, Bruce L. & Hamm, Sandra J. & Danforth, Diana M., 2009. "Analyzing FSA Direct Loan Borrower Payback Histories: Predictors of Financial Improvement and Loan Servicing Actions," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49340, Agricultural and Applied Economics Association.
  3. Bruce L. Dixon & Bruce L. Ahrendsen & Brandon R. McFadden & Diana M. Danforth & Monica Foianini & Sandra J. Hamm, 2011. "Competing risks models of Farm Service Agency seven-year direct operating loans," Agricultural Finance Review, Emerald Group Publishing, vol. 71(1), pages 5-24, May.
  4. Escalante, Cesar L. & Epperson, James E. & Raghunathan, Uthra, 2009. "Gender Bias Claims in Farm Service Agency’s Lending Decisions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 34(2), August.
  5. Escalante, Cesar L. & Epperson, James E. & Raghunathan, Uthra, 2008. "Investigating Gender Bias in Farm Service Agency’s Lending Decisions," Proceedings: 2007 Agricultural and Rural Finance Markets in Transition, October 4-5, 2007, St. Louis, Missouri 48144, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
  6. Dixon, Bruce L. & Ahrendsen, Bruce L. & Nwoha, Ogbonnaya John & Hamm, Sandra J. & Danforth, Diana M., 2006. "FSA Direct Farm Loan Program Graduation Rates and Reasons for Exiting," 2006 Annual meeting, July 23-26, Long Beach, CA 21452, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).


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