Agricultural Credit in India: Status, Issues and Future Agenda

Agricultural credit has played a vital role in supporting farm production in India. Though the outreach and amount of agricultural credit have increased over the years, several weaknesses have crept in which have affected the viability and sustainability of these institutions. Following the shifts in consumption and dietary patterns from cereals to non-cereal products, a silent transformation is taking place in rural areas calling for diversification in agricultural production and value addition processes in order to protect employment and incomes of the rural population. In the changed scenario, strong and viable agricultural financial institutions are needed to cater to the requirements of finance for building the necessary institutional and marketing infrastructure. What is needed in agriculture now is a new mission mode akin to what was done in the 1970s with the green revolution. The difference now is that initiatives are needed in a disaggregated manner in many different segments of agriculture and agro-industry: horticulture, aquaculture, pisciculture, dairying, sericulture, poultry, vegetables, meat, food processing, other agro-processing and the like.[1]



The productivity of agricultural credit in India

This study examines the nature of the relationship between formal agricultural credit and agricultural Gross Domestic Product (GDP) in India, specifically the role of the former in supporting agricultural growth, using state level panel data covering the period 1995–1996 to 2011–2012. The study uses a mediation analysis framework to map the pathways through which institutional credit relates to agricultural GDP relying on a control function approach to tackle the problem of endogeneity. The findings from the analysis suggest that over this period, all the inputs are highly responsive to an increase in institutional credit to agriculture. A 10% increase in credit flow in nominal terms leads to an increase by 1.7% in fertilizers (N, P, K) consumption in physical quantities, 5.1% increase in the tonnes of pesticides, 10.8% increase in tractor purchases. Overall, it seems quite clear that input use is sensitive to credit flow, whereas GDP of agriculture is not. Credit seems therefore to be an enabling input, but one whose effectiveness is undermined by low technical efficiency and productivity.[2]


A critique of traditional agricultural credit projects and policies

Authors critique the results, assumptions, and policies commonly associated with agricultural credit projects in low income countries. A summary of new views on these projects is present. These views emphasize voluntary savings mobilization and positive real rates of interest. Several explanations are given for why few of these new views have been adopted by policymakers.[3]

Agricultural Credit Allocation and Constraint Analyses of Selected Maize Farmers in Ghana

The study analyzes factors influencing agricultural credit allocation and constraint condition of maize farmers in the Upper-Manya Krobo District in the Eastern region of Ghana. The study uses primary data solicited from 130 maize farmers through the administration of a structured questionnaire. Using the paired sample t-test to test for significant differences between the amounts of credit demanded and the amount received by farmers, it is revealed that the amount of credit received was significantly lower than the amount of credit demanded by farmers. The Probit regression model was then used to estimate the parameters of the determinants of credit constraint condition of the farmers. The empirical results reveal that gender, household size of farmers, annual income of farmers and farm size have significant influence on credit constraint conditions of the farmers. The Tobit regression model was also used to estimate the parameters of the determinants of the rate of agricultural credit allocated to the farm sector. The empirical results of the Tobit regression model reveal that age, bank visits before credit acquisition and the amount (size) of credit received have significant influence on the rate of agricultural credit allocation to the farm sector. The study provides the following recommendations: it is imperative that bank officials visit farmers on their farms before granting them loans, and also farmers must be granted the required amounts of loan to enhance the rate of agricultural loan allocation to the farm sector to ensure increased productivity of crops grown for increased welfare and livelihood of these farmers and the citizens of the country as a whole. [4]



Analysis of Peasant Farmers’ Access to Agricultural Credit in Benue State, Nigeria

This study analysed peasant farmers’ access to agricultural credit in Benue State, Nigeria. Data were collected from 130 randomly sampled peasant farmers in Benue State using a structured questionnaire. Descriptive statistics and inferential statistics were used to analyse data collected. The study showed that majority of the farmers (69.23%) had access to agricultural credit. Majority of the farmers (42.22%) accessed amount of credit ranging between 5,000 and less than 50,000 Naira. The predominant source of credit among the respondents was money lending (44.44%). The result of the binary logistic regression showed that at 5% level of significance, age, farm investment, access to extension services, household size, awareness, education, farm size, membership of cooperative society had significant influence on access to agricultural credit among rural farmers in the study area. Delay in approval/disbursement (supported by 52.31% of farmers), credit and lack of collateral security (supported by 52.31% of farmers) constituted the most limiting constraint to sourcing agricultural credit among the respondents. Efforts should be made to create more awareness about the existence of formal agricultural credits for agricultural production among the peasant farmers. The farmers should also be enlightened on how to go about accessing agricultural credit facilities. There should be a deliberate policy to ensure that peasant farmers have access to adequate credit facilities. Efforts should be made to improve the access of peasant farmers to relevant extension services as this would help increase their access to credit facilities. In addition, more rural farmers should be encouraged to join cooperative associations as this can increase their chances of accessing formal agricultural credit facilities because of the comparative advantages associated with membership of cooperative societies. Stringent measures coupled with loan monitoring activities should be put in place to check and reduce the incidence of agricultural credit misappropriation by beneficiaries. [5]

Reference

[1] Mohan, R., 2006. Agricultural credit in India: Status, issues and future agenda. Economic and Political Weekly, pp.1013-1023.

[2] Narayanan, S., 2016. The productivity of agricultural credit in India. Agricultural Economics, 47(4), pp.399-409.

[3] Adams, D.W. and Graham, D.H., 1981. A critique of traditional agricultural credit projects and policies. Journal of development Economics, 8(3), pp.347-366.

[4] Kuwornu, J.K., Ohene-Ntow, I.D. and Asuming-Brempong, S., 2012. Agricultural credit allocation and constraint analyses of selected maize farmers in Ghana. Journal of Economics, Management and Trade, pp.353-374.

[5] Asogwa, B.C., Abu, O. and Ochoche, G.E., 2014. Analysis of peasant farmers’ access to agricultural credit in Benue State, Nigeria. Journal of Economics, Management and Trade, pp.1525-1543.