Agricultural is a seasonal industry. The output depends upon weather condition. Good timely rainfall products good crops. The crops and the income for the farmer suffer when the weather conditions are not favorable. The farmer earns once a year. He spends throughout the year. The income is small. Expenditure is large. There is a gap which he fails to bridge over. He has to borrow for farming and non farming purpose. The loans taken for all such purpose is called rural credit.
Needs of Rural Credit
- To purchase input like seeds, fertilizers, tools, pesticides and water etc
- Reclaim the land affected by water logging, salinity, floods, soil erosion etc. loan are also take for the leveling of uneven lands
- To modernize the farming with tractor, harvester, thresher, combine engine and tube well etc.
Non Development Needs
Loans are taken for their payment of old an ancestral loan, for litigation for ceremonies like marriage, festival etc.
Sources of Rural Credit
Individual, Friends, relatives, villager, shop keeper, money lender. Land lord, Trader etc. they all provide about ten percent of the total loan. The amount of loan is small, such loan are repaid as harvest.
Zarai Taraqiati Bank
They provide about 55% of the total loan. The bank provide short, medium and long term loan for development purpose- purchase of inputs, reclamation of land and modernization of farming. It grants loan in cash. Bank also provide development loans such loan are in kinds
Co- Operative Society
They have direct link with the farmer. They provides short and medium term loan to the farmer. The amount of loan is small. People get the loan against personal security, since the borrower is influential person. He seldom returns the loan.
Bank provides loan against the lender properly. Banks provide round about 25 % of the total loan. Under the supervised credit scheme, the banks provide cheap credit. State bank of Pakistan cover round about 50% less of the entire loan granted to the farmer. State bank also refinances the commercial bank if they run short of funds.
Government provides relief loan to the farmer in emergencies like flood etc. the amount is small. Such loan is not popular due to the red – tape of the offices.