Analysis of loan penetration for agricultural lenders in a ten county study area of Virginia

TR Number



Journal Title

Journal ISSN

Volume Title


Virginia Polytechnic Institute and State University


The purpose of this study was to analyze loan penetration for agricultural institutional lenders in a 10 county area of Virginia and to generate specific recommendations to the Roanoke Association of the Farm Credit Banks of Baltimore. Alleghany-Bedford-Botetourt-Craig-Franklin-Halifax-Henry-Patrick-Pittsylvania-Roanoke County area of Virginia. This area had a very diversified commodity mix, but the main enterprises included dairy, tobacco, and beef.

The case study approach was used to assemble information on the agricultural lenders in the study area rather than a statistically valid random sample. Forty-two agricultural lenders were surveyed for a response representing 86 percent of the total debt outstanding.

While the Farm Credit Service was the largest agricultural lender in Virginia and the United States, Farmers Home Administration was the largest agricultural lender in the study area. Over $181 million of agricultural debt was outstanding as of December 31, 1980 in the study area. Over 60 percent was farm mortgage debt. Almost 2/3 of total farm debt outstanding was in Franklin, Halifax, and Pittsylvania Counties. The major portion of debt outstanding was to dairy, tobacco, and beef producers. In contrast to FmHA and commercial banks, Farm Credit served older borrowers who had more equity. The average Farm Credit borrower had a lower gross farm income than FmHA borrowers. Farm Credit serves a great deal of parttime farmers, particularly beef producers concentrated in the area of the main offices.

It was concluded that the Roanoke Farm Credit Association should be more aggressive. Recommendations to improve Farm Credit's market penetration were developed under three different leadings. Farm Credit should develop a young farmer program. This would enable them to obtain some of the better FmHA borrowers. The marketing programs of Farm Credit need to be emphasized and other marketing services should be offered. The services suggested included tax, estate and financial planning.

Farm Credit's market penetration was expected to increase in the future. Cutbacks in FmHA lending and uncertainty and changes for many commercial banks will contribute to this increase.