ABSTRACT Small and Medium Enterprise Development Authority (SMEDA) claims to provide a nutritious jump to the small farmers for getting more produce from their farm. The present study was conducted to evaluate the project support services for agriculture credit of SMEDA in collaboration with Bank of Punjab (BOP). The purpose of the study was to assess the impact of micro credit scheme of SMEDA and BOP on crop productivity in two union council of district Sheikhupura of Punjab province. One hundred and twenty farmers from the selected villages were interviewed. The results indicated that majority of the farmers (76.7%) meet their financial requirements through institutional credit. More than 60% farmers obtained loans for fertilizers and about 50% got credit for quality seed where as about 37% for pesticides/insecticides etc. it was further indicated that all the farmers used the loan for the purpose for which it was obtained

K Javed

S S Jaffar

T E Lodhi

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Jaffar et al.   J. Anim. Pl. Sci. 16(3-4): 2006 
AN EVALUATION OF MICRO CREDIT SCHEMES OF SMALL AND MEDIUM 
ENTERPRISE DEVELOPMENT AUTHORITY (SMEDA) 
S.S. Jaffar, K. Javed* and T.E. Lodhi  
Deptt. of Agri. Education and Extension, University of Agriculture, Faisalabad. 
*University of Veterinary and Animal Sciences, Lahore. 
ABSTRACT 
Small and Medium Enterprise Development Authority (SMEDA) claims to provide a nutritious jump to the small 
farmers for getting more produce from their farm. The present study was conducted to evaluate the project support 
services for agriculture credit of SMEDA in collaboration with Bank of Punjab (BOP). The purpose of the study was to 
assess the impact of micro credit scheme of SMEDA and BOP on crop productivity in two union council of district 
Sheikhupura of Punjab province. One hundred and twenty farmers from the selected villages were interviewed. The 
results indicated that majority of the farmers (76.7%) meet their financial requirements through institutional credit. More 
than 60% farmers obtained loans for fertilizers and about 50% got credit for quality seed where as about 37% for 
pesticides/insecticides etc. it was further indicated that all the farmers used the loan for the purpose for which it was 
obtained.  
Key words: SMEDA, micro credit, institutional credit, support services. 
 
INTRODUCTION 
 In order to improve farmers’ conditions, there is 
a need to improve the agricultural production of their 
farms. Increase in agricultural production will enhance 
the demand for inputs but the majority of farmers lack 
financial resources for adopting agricultural innovations. 
Rural credit in the form of loans, cash or commodity is 
the only alternative left for the farmers’ improvement 
purpose. Different institutions are providing credit for 
agriculture. These institutions are commercial banks, 
provincial co-operative banks, other provincial co-
operative societies, central co-operative banks, 
agricultural co-operative societies, Zarai Taraqati Bank 
Limited (ZTBL), Khushali Bank, governmental 
organizations and non-governmental organizations 
(NGOs) like AKRSP, NRSP, PRSP, and BRSP. 
 Certain NGOs provide credit to farmers but their 
out reach is very limited. Due to limited access to 
institutional resources; borrowing from money lenders, 
landlords, dealers, relatives and friends is common 
practice. Usually the loans are provided at highly 
extortionate conditions and interest rates. The borrower 
has to pay many times the amount of capital originally 
borrowed before the debt is finally discharged. This adds 
to misery of the poor. The launching of supervised 
agricultural credit scheme by the government was a relief 
for the farmer. The role of Agriculture Development 
Bank of Pakistan (ADBP) now called as Zari Taraqati 
Bank Limited (ZTBL) had been significant with respect 
to credit disbursement. Despite all the efforts to improve 
the economic conditions of the poor they are still under 
pressure and crying for change. The role of banking 
business is “collateral” which serves as explicit guarantee 
against the possible risks. The poor are not considered 
bankable, as they are unable to manage collateral. This 
denial of opportunity has bound them in a vicious circle. 
They are poor because they are already in a poverty trap 
of low initial endowments, low income, low saving and 
low investment.  
 Majority of farmers in Pakistan is resource poor. 
It lacks financial resources, technical advice, financial 
advice, training and development, latest knowledge and 
information, supervision, and coordination between 
banks. Without these factors the farmers are unable to 
increase their farm production and living standard. In 
order to improve the living standard of farming 
community, a number of NGOs and institutions are 
working for their uplift. Small and Medium Enterprise 
Development Authority (SMEDA) claims to provide a 
nutritious jump to the small farmers for getting more 
produce from their farm. SMEDA is one of the 
institutions whose challenging and growing role has 
impelled the need for the present study. No such study 
has so far been carried out which could support to 
elaborate the facts responsible for building the pace of 
development, which SMEDA presently owns. The trend 
of internal evaluation of different projects related to 
SMEDA is available in the form of documents, but no 
formal evaluation has been yet reported by any other 
allied agency. Keeping in view the role of SMEDA in 
strengthening the pillars of rural development for a 
prosperous future and to introduce the lower industrial 
sector as a prominent and promising partner in 
strengthening the national economy has developed an 
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Jaffar et al.   J. Anim. Pl. Sci. 16(3-4): 2006 
urge to study and evaluate the factors responsible for this 
success.  
MATERIALS AND METHODS 
 The present study was designed for and 
conducted in tehsil Ferozwala of Sheikhupura district to 
evaluate the project support services for agriculture credit 
(SSAC) of Small and Medium Enterprise Development 
Authority (SMEDA) in collaboration with Bank of 
Punjab (BOP) Kot Abdul Malik Branch. The purpose of 
the present study was to assess the impact of micro credit 
scheme of SMEDA and BOP on crop productivity in two 
selected union councils; Mandyali and Kot Pindi Das. 
Villages selected from Madyali union council were 
Mysin, Kalar, Emco colony and Mandyli itself. While the 
population of Kot Pindi Das itself was equal to one union 
council while few Dera’s in the surrounding of the village 
were also considered. The impact was examined by 
interviewing respondents (farmers) of the research area. 
 All the contact farmers of SMEDA and BOP 
were the respondents from whom the data were collected. 
According to list of contact farmers obtained from 
SMEDA field  officer, the number of contact farmers was 
168. These contact farmers made the population of the 
study. Sampling was made for the selection of a small 
number of contact farmers from the entire population in 
such a way that they could represent the whole 
population. It was decided to select a reasonable sample 
for the study. In order to have representation of entire 
population of 168, an appropriate sample size of 120 
respondents was drawn with the help of table used for 
determining sample size developed by Fitzggibbon et al., 
(1987) by using simple random sampling technique. 
RESULTS AND DISCUSSION 
 The data revealed that 76 respondents out of 120 
were illiterate (63.3%), while 4.2% of the respondents 
were primary, 0.8% of the respondents were middle and 
14.2% were matric qualified. The percentage of the 
intermediate respondents were 10.8 and the respondents 
holding graduation degree were 6.7 percent. 
 It was also noted that 59.2% of the respondents 
were small farmers holding the land up to 12.5 acres or 
less than 12.5 acres. Similarly 28.3% of the respondents 
were medium farmers i.e., holding land with size in 
between 12.5 to 25 acres. The percentage of the large 
farmers, holding land size greater than 25 acres was 
12.5%. These results are not in line with those of Waheed 
(1991) who reported that farmers having small land 
holdings were not getting their due share of institutional 
credit agencies. Similarly the findings also differ from 
those of Shafique (1997) who concluded that the credit 
system went more in the hands of big and rich farmers as 
compared to more needy farmers. 
 Musharraf (2001) stated that maximum loans 
must be available to small farmers because they have 
good repayment behaviour. He said that special care must 
be given to small farmers who constitute the backbone of 
agricultural sector. The present study shows that majority 
of the farmers were small and it was observed that all the 
respondents small, medium or large farmers were 
enjoying the agricultural credit packages offered by the 
different institutions.  
 It was observed that the 76.7% of the 
respondents meet their financial requirements through 
institutional credit, 12.7% of the respondents through no 
institutional credit while 10.8% of the respondents 
through other sources. Results regarding respondents 
sources for meeting their financial requirements are 
almost similar to NFC and NDFC agricultural credit 
survey conducted during 1983 according to which 
majority of respondents (92%) had preference for 
institutional credit. The important reasons for the 
preference were, easy accessibility (39%), interest free 
loans (21%) and with out any personal obligations (20%), 
on the part of the loanees to the banks. These findings 
employed that the farmer having once gone through the 
bank procedure and formalities involved in the process of 
obtaining production credit, realized that it was 
preconceived fear and notion regarding access to the bank 
credit. After obtaining the first loan, the farmer became 
familiar with the bank’s requirements and starts 
preferring bank credit for meeting his input needs instead 
of going to non institutional credit which involved 
personal obligation and necessitated a close association 
with the lenders. 
 It was noticed that 51.7% of the respondents got 
credit only one time before from ZTBL, 32.5% of the 
respondents got credit from M.C.B. two times before, 
13.3% of the respondents told that they got credit three 
times before from H.B.L. while 0.8% of the respondents 
told that they obtained credit from A.B.L., U.B.L., N.B.P. 
more than three times, respectively. 
 Table 1 depicts the different purposes for which 
the respondents applied for the credit. The separate 
percentage for separate category was calculated as that 
for the chemical fertilizers 60% of the respondents got 
credit from chemical fertilizers category. Similarly 47.5% 
of the respondents got credit for the quality seed and 
other 52.5% of the respondents didn’t get credit for 
quality seed. For insecticides and pesticides 36.67% of 
the respondents got credit, only 30% of the respondents 
from 100% of tractor category got credit for tractor and 
6.7% of the respondents got credit for farm machinery. 
From the category livestock 14.2% of the respondents got 
credit for livestock and zero % of the respondents told 
that they didn’t get any credit for any other purpose to 
serve. All the respondents had utilized the loan for the 
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Jaffar et al.   J. Anim. Pl. Sci. 16(3-4): 2006 
purpose it was sanctioned. Results are similar to Mushtaq 
(2000) who found that agricultural loan was spent on the 
purchase of chemical fertilizers, insecticides/pesticides 
and farm machinery. The results of the present study are 
in line with there of Idress and Ibrahim (1993) who 
reported that the capital was required for the purchase of 
improved seeds, fertilizers, pesticides, farm implements 
and farm machinery. Therefore, capitcal was considered 
as a prerequisite for agricultural development. 
Table 1: Reasons given by respondents for obtaining 
loan  
 
Response of the respondents 
Yes No Purpose 
F (%age) F (%age) 
For chemical fertilizers  72 60 48 40 
For quality seed  57 47.5 63 52.5 
For insecticides and pesticides  44 36.67 76 63.3 
For tractor  36 30.0 84 70.0 
For farm machinery  8 6.7 112 93.3 
For livestock  17 14.2 103 85.8 
REFERENCES 
Fitzggibbon, C. T. and L. L. Morris, (1987). How to 
design a program evaluation Newburry Park 
C.A: Sage, USA. 
Idrees, M. and M. Ibrahim, (1993). Agricultural credit 
role in the development of Agriculture J. of 
Rural Development and Admn. 25(4): 67-74. 
Malik, S.J., M. Mushtaq and M..A. Gill (1991). The role 
of institutional credit in the Agricultural 
Development of Pakistan. The Pakistan 
Development Review Vol. 30(4): 1039-1048. 
Musharraf, P. (2001). “Chief Executive Lands ADBP 
performance”, distributes Loans to Small 
Farmers, Agro Bankers, Islamabad. 
Mushtaq A. (2000). An Evaluation of Agricultural Credit 
Programm (One Window Operation) of 
Agricultural Development Bank of Pakistan as 
Perceived by the loanees of Faisalabad Branch. 
M.Sc. (Hons.) Thesis, Deptt. Agri. Extension, 
Univ. Agri. Faialabad. 
Shafique, M. (1997). Past production and future 
production potential of cotton in the Punjab. 
M.Sc. Thesis, Deptt. Of Agri. Econ., Univ. of 
Agri. Faisalabad.  
Waheed, A. (1991). An investigation into the constraints 
confronting the small farmers with the special 
reference to wheat to production in district 
Gujrat M.Sc. Thesis, Deptt. of Agri. Econ. Univ. 
of Agri. Faisalabad.  
 
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An evaluation of micro credit schemes of small and medium enterprise development authority (SMEDA).

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An evaluation of micro credit schemes of small and medium enterprise development authority (SMEDA).

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