Financial Literacy and Credit Accessibility of Rice Farmers in Pakistan: Analysis for Central Punjab and Khyber Pakhtunkhwa Regions

Abstract

This study investigates the factors that affect farmers’ access to Food Security and Agricultural Credit (FSAC) services for the farmers of Pakistan who have no access to banking but have a feasible farm business. Using multiple regressions and logistic analysis, the authors revealed the determinants of farmers’ financial literacy and analyzed the variables which affected the farmers’ accessibility to FSAC. Results indicated that the average financial literacy of respondents was at a moderate level. It was affected by the age of respondents, length of their education, distance to nearby cities, ownership of bank accounts, annual income, and financial education experience. The FSAC accessibility was also impacted by the area of cultivated land, interest rate, collateral, farms’ income, financial literacy index, credit accessibility experiences, the legal status of farmer groups, and the amount of a loan. Some of the issues that prevent farmers from having widespread access to the FSAC include the lack of loan need, lack of FSAC awareness, lack of collateral, loan usury perspective, loan rejection experience, fear of borrowing from the bank, and inactive farmer groups. The study contributes to the existing literature on the determinants of farmers’ access and choice of credit sources by using a primary data set.