Glossary

Farm Credit System (FCS)

Also known as: FCS, FCS

A nationwide network of borrower-owned cooperative lending institutions, chartered by Congress as government-sponsored enterprises (GSEs), dedicated to financing agriculture and rural communities -- structurally parallel to Fannie Mae and Freddie Mac, but built around a cooperative ownership model where borrowers become part-owners of the lending association.

The Farm Credit System is organized as a system of local, borrower-owned Farm Credit associations that originate loans directly, funded through Farm Credit System banks that raise capital in the national bond markets much as Fannie Mae and Freddie Mac do for housing finance. Because each association is a cooperative, a borrower who takes a loan also becomes a part-owner of the association and is eligible for patronage dividends -- a partial return of interest paid, distributed from the association's earnings -- which effectively lowers the borrower's realized cost of capital below the loan's stated note rate.