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Rural Banks and Farm Loan Participation
Author(s) -
Barry Peter J.
Publication year - 1978
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1240050
Subject(s) - loan , profitability index , earnings , business , balance (ability) , finance , economics , medicine , physical medicine and rehabilitation
Banking theory is used to develop a static, certainty model for evaluating profitability of farm loan participations for rural banks. Techniques are developed and applied to measure empirically the effects of participations on rural bank earnings attributed to farmer customer relationships and costs associated with demand balances required by correspondent banks. Model results show a decline in optimal levels and profits of loan participations for rural banks as correspondent balance requirements increase and as other parameters adjust to levels reflecting tighter monetary conditions. Participation strategies that may enhance the flow of funds into rural areas are also considered.