Black farmers have historically and systemically been at a disadvantage when competing with their counterparts. They have had less land, inferior crops, and have been shorted on generational wealth and government assistance. A new study led by Ashok Mishra, the Kemper and Ethel Marley Foundation Chair in Food Management in the Morrison School of Agribusiness at Arizona State University, finds that Black farmers have a more difficult time accessing business loans than White farmers.
Access to credit allows farmers to satisfy cash needs induced by the agricultural production cycle, purchase farmland and other real estate, and invest in fixed improvements. In loan programs, discrimination can take several forms — for example, reduced loan amounts, higher interest rates, or increased loan processing time. Black farmers usually lack the documents — income statement, assets, balance sheet — to submit loan applications. The Farm Service Agency (FSA) of the U.S. Department of Agriculture is a lender of last resort and makes direct farm ownership and operating loans to family-sized farms that cannot obtain loans from elsewhere.
Delays in access to credit, such as increased loan processing time, can affect the timely planting and harvesting of crops and feed for livestock. The research found significant differences in loan application completion and processing times for operating loans. The most striking finding from this study, according to Dr. Mishra, is that it takes significantly longer for loan application completion and loan processing time for Black borrowers compared to all other farmers. Longer loan application completion for Black borrowers could be due to a lack of communication between the loan officer and applicant, failure to provide a clear and accurate description of the information and documents required, and attempts to discourage applicants.
The full study, “Racial Disparities in Farm Loan Application Processing: Are Black Farmers Disadvantaged?” was published on the website of the journal Applied Economic Perspectives and Policy. It may be accessed here.