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Resource centre on India's rural distress
 
 

'Access to formal credit increases income of farmers' -TV Jayan

-The Hindu Business Line

Letting farmers use Kisan Credit Card for non-farm use for a limited time can help improve credit facility to small farmers

The returns earned by farmers, who have access to formal credit, are on an average 17 per cent higher than what farmers, who are dependent on informal sources including loan sharks, earn, said an agricultural economist.

Besides, access to institutional credit increases the per capita monthly consumption expenditure (MCE) by 10 per cent compared to those without formal credit facility. The per capita MCE is a proxy for household income and, therefore, an increase in household expenditure reflects a decline in poverty, said Anjani Kumar, Research Fellow at the International Food Policy Research Institute (IFPRI), New Delhi Office.

“The government has been making efforts to enhance the flow of credit to the agriculture sector and they are bearing fruits. However, the demands for agricultural credit are still unmet from the formal sources and, therefore, farmers resort to informal sources to meet their borrowing needs, said Kumar who gave a presentation at the recently concluded 14th Agricultural Science Congress here.

Agricultural households’ access to institutional credit is influenced by a number of socio-economic, institutional and policy factors such as education, caste affiliation, gender and assets ownership.

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