Smallholders' access to agricultural credit and its effect on farm production, income and household food security in Pakistan | |
| Author | Hussain, Abid |
| Call Number | AIT Diss. no. RD-12-03 |
| Subject(s) | Food--Pakistan--Safety measures Agricultural credit--Pakistan |
| Note | A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Regional and Rural Development Planning, School of Environment, Resources and Development |
| Publisher | Asian Institute of Technology |
| Abstract | Formal institutions working under the prudential regulations of the State Bank of Pakistan are supposed to disburse credit for farm inputs, machinery, livestock, poultry and other various agricultural activities. This study analyzed smallholders' access to and adequacy of credit, and its effectiveness to improve their farm production, income and household food security, using primary data collected from 208 households with landholdings up to 5 acres (=2 ha) through a standardized questionnaires, focus-group discussions and unstructured interviews. The findings depicted a partial success of the national credit policy in terms of the ration of households having access to fo1mal credit but appeared even less efficacious when the total amount of credit demanded and obtained were compared. 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 groups of smallholders had comparatively better access to fo1mal credit. Due to a lack of adequate access to formal credit, info1mal lenders continued to play an overriding role in the rural credit markets. Fundamentally, credit has substituted substantial portions of households' consumption expenditures (credit fungibility) and gradually their own capital for fa1m investment (credit dependency). Due to these substitutions, it cannot be stated that credit is being used effectively on agricultural purposes though it has improved the farm investment and farm production. These improvements cannot merely be attributed to the amount of credit rather these are also supported by the supplementary features associated with particularly the informal credit, i.e. quality of inputs and intensive extension services. Consequently, smallholders started shifting from subsistence agriculture to integrated farming systems without substituting their main food crops, thereby improving the gross farm returns and cash income. Among all three groups compared, lower- and upper-smallholders improved their farm income through increasing significantly the investment in fruits, livestock and poultry in view of the higher prices of these products in the local markets. On the other hand, majority of middle-smallholders focused more on cash crops i.e. sugarcane, cotton and fruits based on the suitability of land for said crops. Nevertheless, improved farm income influenced the food expenditures of all three groups significantly. Not only had the calorie supply from purchased food items but from home production also increased, which subsequently enhanced households' total calorie intake nearly by 20%, thereby reducing the number of insecure households. However, on average, lower-smallholders could not reach the national food security line (2350 kcal/day/AE) though their nutritional gap reduced after the availability of credit. The identified major reasons are constraints of land and credit, their higher farm deductions, and relatively lower absolute change in their farm income. Regarding the estimated elasticities, it has been found that in the case of lowerand upper-smallholders, livestock income has greater impact on their calorie intake whereas for middle-smallholders, this impact is not significant due to their higher dependency on cash crops. Based on the findings of this study, strategies are suggested to improve the effectiveness of credit by enhancing formal credit supply with simplified procedures, proper monitoring, and intensive extension services about the input-use and integrated farming practices. It is hoped that these strategies would make sustainable improvement in farm income, thereby remedying the problem of credit fungibility. |
| Year | 2012 |
| Type | Dissertation |
| School | School of Environment, Resources, and Development (SERD) |
| Department | Department of Development and Sustainability (DDS) |
| Academic Program/FoS | Rural Development, Gender and Resources (RD) |
| Chairperson(s) | Thapa, Gopal Bahadur |
| Examination Committee(s) | Soparth Pongquan ; Shrestha, Rajendra Prasad ;Arun, Thankom G. |
| Scholarship Donor(s) | Higher Education Commission (HEC) of Pakistan AIT Fellowship |
| Degree | Thesis (Ph.D.) - Asian Institute of Technology, 2012 |