Supervised Agriculture Credit

Importance of Micro-Credit in Agricultural Lending and Development

The farmers in Pakistan have always been in need of micro-credit in order to perform their social needs, in addition to purchase the farming inputs or making improvements on lands. But on other hand, they have always been refused to give enough micro-finance and credit. In this regard, neither the non-institutional sources (friends, relatives etc), nor the institutional sources (ADBP, Cooperative Banks, Commercial Banks, Provincial Revenue Department) have fulfilled the need of needs of the farmers. Most of the backwardness of agriculture sector is attributed to non-availability of funds. Therefore, to remove the paucity of funds with rural farmers, efforts will have to be made to mobilize more credit and finance towards farming sector. The question arises, who will provide funds to this sector when it is surrounded by;

1. Uncertainty of output and prices.

2. Poverty of the small farmers who are more than 50% in Pakistan and they lack the securities in order to get loans.

3. The friends and relatives provide the meager amounts as credits.

4. The recovery of loan from agriculture sector is a difficult job.

5. Majority of farmers are illiterate, rigid and orthodox and they do not know any thing about banking practice. As micro-credit is life blood of agriculture production.

Therefore, the financial needs of farmers can not be under-estimated and they will have to be provided more funds, despite all of the problems attached with agriculture credit. Therefore, to provide more credit and finance to farmers in future we will have to depend upon the experiences of West as well the experience of  Bangladesh in the form of  Greeman Bank. Thus the future of credit and farming in agriculture will be bright if farmers are given the loans;

1. In terms of agriculture inputs along with consultancy services - 

The case of supervised credit, This can better be done through NGOs working at village level, They will follow less tedious loaning procedure and they will have complete supervision over the funds used and output produced.

2. The loans given by NGOs and micro-financing institutions like Greeman bank will advance smaller amounts. The recovery of such advancing is also easy when the bankers are having a gross root link with the villagers.

3. The Commercial Banks and Agricultural Development Bank should come forward to rescue the dying farmers of Pakistan. They must relax the loaning conditions; loans be advanced on personal security, instead of physical security; the greater contact be maintained between the banking staff and the poor rural borrowers; and State Bank of Pakistan should provide cheaper loan to commercial banks so that they could lend the funds to farmers at cheaper rates.