Agricultural credit constraints and borrowing behavior of farmers in rural Punjab

Abstract

The government of Pakistan introduced several agricultural credit programmes\nthrough institutional sources. The impact of these programmes was less than optimal due to\nrambling credit policies. The farmers were facing many constraints to avail agricultural\ncredit in a timely fashion. The collateral inter alia was one of the major constraints. The\nobjective of the paper is to identify constraints and suggest remedial measures to make\nefficient use of agricultural credit schemes. Majority of the farmers revealed that they could\nnot avail credit because of needed collateral. The hard hits were tenants and share croppers\nwho do not own land, and thus were unavailable to avail credit. The high mark up both\nfrom formal and informal sources was another constraint.\nThe borrowing behavior of the respondents was estimated through the logit model\nand identified the determinants of credit constraints. The results showed that the\ncoefficients of transitory income, education level, and predicted interest rate have important\nbearing on borrowing behavior. The household consumption expenditure was positively\nand significantly determined by operational holding and value of implements