Today’s farmers face unprecedented challenges. For small- and midscale, limited-resource farmers, one of those challenges is finding enough capital to finance their businesses. On the lending side, tightening regulations, limited USDA-Farm Service Agency budgets, and consolidation of lending institutions have resulted in fewer lenders with agricultural expertise or mandates.

Community development finance institutions (CDFI) finance many small businesses. However, they were pioneered to address urban issues and typically have little or no agricultural expertise. While agricultural lenders such as Farm Credit and the USDA Farm Services Agency do offer credit, neither adequately serves farm operators who are perceived as higher risk because they are start-ups, have innovative business models lacking industry benchmarks, or are poorly collateralized. 

At the same time, the public’s growing interest in local food production and concern over global energy dependencies mean that a regionally focused agricultural network consisting of a variety of farms is possible. Presently, however, agriculture is barely reflected in socially responsible investing, which grew to $2.29 trillion in 2005, according to the Social Investment Forum. “Dedicated investment vehicles do not exist for investors seeking community investments in this area,” reports Eric Becker of Trillium Asset Management and The Carrot Project Advisory Board. Such vehicles could be an effective response to farm lending gaps.