Microloans for Farmers
What was the challenge?
Many farms in the United States, including smaller and newer enterprises, do not have access to the credit they need to build and sustain their operations. To fulfill this need, the Farm Service Agency (FSA) at the United States Department of Agriculture (USDA) provides small amounts of credit to qualified borrowers who have been unable to obtain farm credit from commercial lenders. This extension of credit might be especially helpful for new farmers, or farmers who are establishing operations such as urban farms that are not served by the commercial lending industry. Farms like these often lack the type of business records necessary to qualify for commercial loans, creating a catch-22 situation that makes it difficult to build new businesses. Microloans are a particular type of loan offered by FSA that helps to fulfill the needs of businesses like these.
What was the insight?
In order to provide credit to a broad array of agricultural entrepreneurs, especially those who might be new to farming and who might not participate in other USDA programs, it is critical to widely share information about the availability of microloans. This information must be concise and targeted, providing individuals with clear action steps that they can take to learn more about, and potentially apply for, loans from FSA.
What was the pilot?
A new outreach letter was mailed to randomly selected zip codes. It provided information on the benefits of the microloan program, a shortened URL for accessing more information online, and customized contact information directing each farmer to the loan officer in his or her home county. A broad sampling of farmers received the letter, including individuals who had not previously participated in USDA programs or been a customer of FSA.
What was the impact?
The letters more than doubled the amount of microloan-related activity in FSA county offices, introducing the microloan program widely to farmers who might benefit. The letter also influenced the number of successful applicants, increasing the percentage from approximately 0.09 percent to 0.11 percent.View Abstract