Importance Of Credit In Agriculture

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The agriculture sector is contributing about 21 percent to the national income (GDP) and is providing employment to 43 percent of the workforce. It is supplying raw materials to the industrial sector for example the textile industry of Pakistan. There are two available sources of credit that are informal through relatives , friends village shopkeepers , commission agents and traders and the other is formal which is through different institutions zarai taraqiati bank limited, domestic private banks and commercial banks etc. Credit is a very important tool for farms especially for small ones. Although getting credit has become a necessity for almost everyone especially for small business and same goes for small farms. They need to survive and…show more content…
The farmers fear that they might not be able to repay due to heavy rain that are untimely, floods and other possibilities that may rise. Left with damaged crops the farmers won’t be able to do anything. The production per acre is also very low and so are the profits which reduce the loans repayment ability. Small farmers can’t give guarantee and are unable to offer any kind of security to the credit institutions. So these institutions are reluctant to give credit. Even if the farmers are fortunate enough to get loan somehow to purchase the seeds fertilizers and other inputs for their crops the credit timings can still be a major issue. If not provided on time the farmer fails to make use of these inputs. Farmers may not be able to utilize what they have for their own good and instead they just Misuse this credit on death and birth occasions lavishly. However our government has taken measures to solve these problems of the rural credit. Establishing agricultural finance institutions was one of the steps. ADFC in 1952 and ABP in 1957 were established to finance agriculture and they were merged into ADFC which is considered as the main source of agriculture finance. In 1976 federal bank for cooperative was set up which has been very effective to provide finance to the agriculture…show more content…
In 1976 agricultural credit advisory committee was formed to solve issues of this sector. In 1977 a special scheme was developed to extend larger amount of credit. Interest free loans are made available for the farmers. A law was formed for recovery of agricultural loans as arrears to lend revenue. The pass book system has been introduced to simplify the procedure of borrowing hence another step taken by the government for the ease of these poor people. The mandatory credit target scheme was formed for the agriculture sector in which the commercial banks are given mandatory target for credit by the state bank. The banks have also been advised to give supervised finance in kind to ensure the proper use of credit. The government has opened bank branches in rural areas and they are advised to keep close contact with farmers and increase the credit facilities too. And the credit schemes made are reviewed every

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