Agricultural credit constraints and borrowing behavior of farmers in rural Punjab

Abstract

The government of Pakistan introduced several agricultural credit programmes through institutional sources. The impact of these programmes was less than optimal due to rambling credit policies. The farmers were facing many constraints to avail agricultural credit in a timely fashion. The collateral inter alia was one of the major constraints. The objective of the paper is to identify constraints and suggest remedial measures to make efficient use of agricultural credit schemes. Majority of the farmers revealed that they could not avail credit because of needed collateral. The hard hits were tenants and share croppers who do not own land, and thus were unavailable to avail credit. The high mark up both from formal and informal sources was another constraint. The borrowing behavior of the respondents was estimated through the logit model and identified the determinants of credit constraints. The results showed that the coefficients of transitory income, education level, and predicted interest rate have important bearing on borrowing behavior. The household consumption expenditure was positively and significantly determined by operational holding and value of implementsAgricultural credit, Borrowing Behavior, Interest Rate, Collateral. Introduction