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 implement