Production Function, Institutional Credit and Agricultural
      Development in Pakistan

Zuberi, Habib A.

doi:10.30541/v28i1pp.43-56

Cited by 53 publications

(44 citation statements)

References 7 publications

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“…More importantly, formal credit goes overwhelmingly to support agricultural production (87.5%), while only 26.9% of informal loans support agriculture. Past studies also have shown that formal credit contributes significantly to agriculture of rural Pakistan (Zuberi, 1989;Malik et al, 1991). Zuberi (1989) finds that 70% of total formal credit is used to purchase seed and fertiliser.…”

Section: The Role Of Agricultural Development Bank Of Pakistan (Adbp)mentioning

confidence: 99%

“…The issue now is to what extent formal credit matters to agriculture. Zuberi (1989) concludes that most of the increases in agricultural output can be explained by changes in the amount of seed and fertiliser expenditure. Malik et al (1991) attempts to provide evidence for the role of formal credit in agricultural produc-tion.…”

Section: The Role Of Agricultural Development Bank Of Pakistan (Adbp)mentioning

confidence: 99%

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The impact of farm credit in Pakistan

Khandker

Faruqee

2003

Agricultural Economics

100

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Both informal and formal loans matter in agriculture. However, formal lenders provide many more production loans than informal lenders, often at a cost (mostly loan default cost) higher than what they can recover. For example, the Agricultural Development Bank of Pakistan (ADBP), providing about 90% of formal loans in rural areas, incurs high loan default costs. Yet, like other governments, the Government of Pakistan supports the formal scheme on the grounds that lending to agriculture is a high risk activity because of covariate risk. Hence, such policies are often based on a market failure argument. As farm credit schemes are subsidised, policy makers must know if these schemes are worth supporting. Using a recent large household survey data from rural Pakistan (Rural Financial Market Studies or RFMS), we have attempted to estimate the effectiveness of the ADBP as a credit delivery institution. A two-stage method that takes the endogeneity of borrowing into account is used to estimate credit impact. Results reveal that ADBP contributes to household welfare and that its impact is higher for smallholders than for large holders. Nevertheless, large holders receive the bulk of ADBP finance. The ADBP is, thus, not a cost-effective institution in delivering rural finance. Its cost-effectiveness can be improved by reducing its loan default cost and partially by targeting smallholders in agriculture where credit yields better results. ). Collateral-free lending, proximity, timely delivery and flexibility in loan transactions are some of the attractive features of informal credite2 However, informal finance may not be as conducive to development as formal finance because:* Although the nominal rate of interest is lower for formal loans than for informal loans, the transaction costs of borrowing are higher for formal loans than for informal loans. Some informal lenders also perform an important role by facilitating the marketing of products or purchasing of inputs, such as fertiliser. Additionally, since informal loans are often given in kind and for specific purposes, some client needs are served better by informal than by formal loans.0169-S1S0/03/$ -see front matter 0

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Section: The Role Of Agricultural Development Bank Of Pakistan (Adbp)mentioning

confidence: 99%

Section: The Role Of Agricultural Development Bank Of Pakistan (Adbp)mentioning

confidence: 99%

The impact of farm credit in Pakistan

Khandker

Faruqee

2003

Agricultural Economics

100

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“…Zuberi's study (Zuberi, 1989) found that formal credit is an important determinant of fertilizer and seed expenditure. Pakistani farmers typically borrow money at the beginning of the harvest to purchase inputs.…”

Section: Resultsmentioning

confidence: 99%

Application of Islamic banking instrument (Bai Salam) for agriculture financing in Pakistan

Kaleem¹,

Wajid²

2009

British Food Journal

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -Islam prohibits interest as a source of income or profit. The purpose of this paper is to explore the possible application of Bai Salam contract (forward sale agreement) as an alternative financial instrument in the agriculture sector of Pakistan. Design/methodology/approach -A survey was conducted in four districts of the Punjab with a specifically designed questionnaire. A convenient sampling technique was used to gather farmers' concerns related to crops inputs, output and credit requirements. Findings -Empirical findings conclude that agriculture income represents only up to 60 percent of the income of an average farm household. About 70 percent of farmers participate in the credit market. They need money to purchase crops inputs, to pay the labour and to hire rental machinery. Farmers believe that they can save up to 25 percent in costs if they purchase inputs on cash. The survey also discloses that middlemen are the larger financers and buyers of crops in the rural economy whereby only 10 percent of transactions are conducted on a purely cash basis. Farmers usually return the money after the sale of the crop.Research limitations/implications -The concept of the paper can be extended to areas where large landlords dominate the scene. Alternatively, it can be extended towards non-farm activities such as cattle raising and poultry. Originality/value -The paper is a first comprehensive effort to explore the possible application of an Islamic banking instrument in the agriculture sector of Pakistan. It also suggests three possible models for financing under a Bai Salam contract. Some policy recommendations are also given.

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“…While some studies in literature find the direct and significant impact of agriculture credit on output (Bashir et al, 2010;Iqbal et al, 2003;Saleem & jan, 2011;Rima, 2014;Villanueva, 2014;Ekwere & Edem, 2014), some others hold that the impact of agricultural credit on farm output cannot be directly established (Sriram, 2007;Hussain, 2012;Zuberi, 1989;Sjah et al, 2003). Ahmad (2011) and Raza and Siddiqui (2014) insist that it is indirect credit to agriculture which has significant impact on agricultural output and not direct credit.…”

Section: Impact Of Agriculture Credit On Output and Productivitymentioning

confidence: 99%

Agriculture Credit in Developing Economies: A Review of Relevant Literature

Yadav

Sharma

2015

IJEF

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This paper aims to present a comprehensive review of 110 studies on agriculture credit in developing countries during 1995 to 2015. The literature has been classified and presented on the basis of time period, country of study, methodology used, issues covered, and sources of study. Agriculture credit has gained interest of policy makers and researchers in developing economies in recent years with raising concerns of issues like food security and rising population. However, the situation of small and marginal farmers is still vulnerable and they lack timely and adequate access to institutional sources of finance. Non-institutional sources of credit are still dominant in rural credit markets; while the role of micro-finance appears dubious. This study will prove helpful for policy makers and future researchers who wish to study diverse issues in rural finance in general and agriculture credit in particular.

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Production Function, Institutional Credit and Agricultural Development in Pakistan

Cited by 53 publications

References 7 publications

The impact of farm credit in Pakistan

The impact of farm credit in Pakistan

Application of Islamic banking instrument (Bai Salam) for agriculture financing in Pakistan

Agriculture Credit in Developing Economies: A Review of Relevant Literature

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