Will Wal-Mart Be Your Ag Banker?
Guess who is in the crosshairs of Wal-Mart’s future strategic plan. Yes, banks and possibly the Farm Credit System. Currently the FDIC is reviewing Wal-Mart’s application for a bank charter. Why would Wal-Mart want to enter banking and possibly become an agricultural lender?
In the U.S., there are over 7,500 banking institutions and nearly 100 Farm Credit associations and 2,500 plus banks delivering credit with an emphasis on agriculture and rural areas. Wal-Mart’s business model is driven by taking inefficiencies out of the distribution system. Their planners feel that the banking system is very disjointed and fragmented with duplicative procedures and processes that result in inefficiency in the delivery of credit.
Up to a third of agricultural banks are family-owned, resulting in a transition between generations. Some of the new generation of family members does not want to carry on the family tradition of banking, resulting in possible merger or sale targets.
Wal-Mart also has a very strong distribution network in rural America, where they developed and refined their business model, so it’s natural for the strategic planners to consider this industry for growth.
Wal-Mart has already attempted to purchase banks in Oklahoma, Canada’s Toronto-Dominion and California. In each case, regulators thwarted the company’s move into banking. Only time will tell. However, whether you are pro or con, the public must be informed on this potential move.
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Editors' note: Dave Kohl, The Corn and Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups.
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