Smallholders’ Access to Rural Credit: Evidence from Pakistan

“…Sarap (2000) went on to suggest that policies should be directed both towards reducing the overall transaction costs of formal loans to small farmers, and towards improved collection processes. Amjad and Hasnu (2007) found the tenure status, family labor, literacy status, off-farm income, value of non-fixed assets and infrastructure quality to be the most important variables in determining access to formal credit. They also found that the total operated area, family labor, literacy status and off-farm income are significantly related to the determination of credit status of smallholder farmers from informal sources.…”

Section: Empirical Studies On Determinants Of Access To Creditmentioning

confidence: 99%

“…This refers to the total land size cultivated by the household and it is measured in hectares (ha). It is a continuous variable and it's expected that the larger the land cultivated, the more labour required which demands more capital which can be raised through access to credit (Yehuala, 2008, Amjad andHasnu, 2007).…”

Section: Area Cultivated (Areacult)mentioning

confidence: 99%

Determinants of Access to Formal Credit by Smallholder Tobacco Farmers in Makoni District, Zimbabwe

Dube¹,

Mariga²,

Mrema³

2015

GJAS

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This study used data from 77 smallholder tobacco farmers from Makoni district in Zimbabwe to investigate factors affecting smallholder tobacco farmers' access to formal credit. The results of the study showed that contact with extension services, farmer's attitude towards risk of borrowing and ownership of land cultivated significantly and positively influenced the probability of farmers' access to formal credit in the study area. These findings confirm that improving access to extension services and secure land ownership remain the important factors in the quest to improving access of smallholder farmers to formal credit in Zimbabwe. Improved access to information on credit use through extension services is also likely to positively influence farmers' perceptions on credit risk, which would in turn reduce fears associated with formal credit sources. Encouraging farmers to insure both their crop and loans against the event of crop failure can also be used to reduce the risk associated with formal credit sources and help improve access to formal credit by a majority of smallholder farmers.

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“…ZTBL, in addition to the prevailing rate of mark-up adds several other charges like loan case file Rs.200, postal charges Rs.250 and 1 percent and 2 percent for loan up to Rs.50, 000 and above Rs.50,000 respectively as appraisal fee (Annual Report 2013, ZTBL). Amjad and Hasnu (2007) noted that the effective rate of interest was about 21 percent for the smallest landholders and about 14 percent for the largest farm-size group.…”

Section: Problems Of Existing Agricultural Creditmentioning

confidence: 99%

Issues in Existing Agricultural Credit and Scope of Bay‘ al-Salam as an Alternative

Abbasi¹,

Khan²,

Mansoori³

2019

J. Islam. bus. manag.

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This study focuses on issues in agricultural finance in Pakistan and suggests the use of bay‘ al-Salam, the forward contract as allowed in Islamic law of contracts. Despite vital importance, the agriculture sector in Pakistan hasn’t been able to make the case to gain attention on the Government’s priority list. A number of negatively impacting elements can be pointed out, but the standalone interest based system of agricultural credit can be termed as the most harmful for farmers, agriculture sector and the national economy. Major problems include insufficient institutional credit, exorbitant rate of interest, non-availability of collateral and the cumbersome procedures. This situation creates a credit gap which is filled by the non-institutional sources like middlemen, shopkeepers and money lenders who too exploit the poor farmers. However, they still borrow from private sources as the access is easier. The concerns are growing about the existing interest based credit system and voices are also raised for an alternative system that is easy to access as also compliant with the Shar¯ı‘ah principles. Salam financing for the purchase of crops initiated by Sudanese banks couldn’t create desired impact fully. Similarly, Salam financing offered by First Islamic Bank of Indonesia faced serious Shar¯ı‘ah compliance issues. However, a private body namely Wasil Foundation’s bay‘ al-Salam initiative in Pakistan seems comparatively a successful story. A relatively better response and wider acceptance by the stakeholders to Salam financing offered by Wasil indicates that banks (both conventional and Islamic) cannot apply Salam efficiently due to non-availability of required infrastructure. Although Salam financing is highly instrumental mode of finance for agriculture, but could fail if managed through the Islamic banks in obtaining the desired outcome. This study, based on the literature and expert opinion collected through a survey, proposes a separate body to handle Salam financing to agriculture in Pakistan.

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Smallholders’ Access to Rural Credit: Evidence from Pakistan

Cited by 41 publications

References 24 publications

Factors effecting farmers’ risk attitude and risk perceptions: The case of Khyber Pakhtunkhwa, Pakistan

Factors effecting farmers’ risk attitude and risk perceptions: The case of Khyber Pakhtunkhwa, Pakistan

Determinants of Access to Formal Credit by Smallholder Tobacco Farmers in Makoni District, Zimbabwe

Issues in Existing Agricultural Credit and Scope of Bay‘ al-Salam as an Alternative

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