Smallholders’ access to agricultural credit in Pakistan

• Published in: Food security Vol. 4; no. 1; pp. 73 - 85
• Main Authors: Hussain, Abid, Thapa, Gopal Bahadur
• Format: Journal Article
• Language: English
• Published: Dordrecht Springer Netherlands 01.03.2012
• Subjects: Agriculture; Biomedical and Life Sciences; Environment; Food Science; Life Sciences; Original Paper; Plant Sciences; Social Policy; Social Sciences; Access to credit; Pakistan; Agricultural credit; Food security; Collateral; Adequacy of credit; Smallholders
• ISSN: 1876-4517; 1876-4525
• DOI: 10.1007/s12571-012-0167-2

The Government of Pakistan has implemented a policy of food security for smallholders by making provision of credit needed for purchasing inputs such as farm machinery, fertilizer and seed. This study analyzed access to and adequacy of credit for smallholders with landholdings up to 5 acres (= 2 ha), using primary data collected through a survey of 208 households, focus-group discussions and unstructured interviews. The findings revealed a partial success of the national credit policy in terms of the proportion of households having access to formal credit but appeared less successful when this was compared with the total amount of credit demanded and obtained. Among the three types of smallholders compared, i.e. lower-smallholders (≤1.0 acre), middle-smallholders (1.01–2.50 acres) and upper-smallholders (2.51–5.00 acres), the lower-smallholders obtained least benefit from the policy as reflected in the formal credit accounting for 12% of the total credit obtained and only 6% of the total credit demanded. The other two types of smallholders had relatively better access to formal credit. Due to a lack of access to adequate formal credit, informal sources have continued to play a major role in the credit market. The causes for this are explained and relevant policy recommendations are made for improving smallholders’ access to credit in the study area and elsewhere in Pakistan. It is hoped that the findings of this study will make a useful contribution to the understanding and remedying of the difficulties that smallholders experience in obtaining credit which may be of value not only in Pakistan but in other developing countries.