Some Operational Issues and Institutional Constraints in Lending to Small Farmers

Abstract

The small farmer, as is apparent from this term, is one who does not have enough land to produce more or his family labour is scarce, or he is using outdated modes of cultivation or his family feels a compelling need for cash income from non-farming pursuits because of strict adherence to the traditional cropping pattern. As such, it is because of this typical socio-economic environment that limits the possibility of raising his standard of living through the harnessing of available limited resources to its maximum in a skillful manner. However, there is quite a difference of opinion about the definition of what is a small farmer. Usually, he is taken to be synonymous with a poor farmer. A notable feature of the agrarian scene in Pakistan is the predominance of small holdings. Small farmers, defined as those with landholdings upto 5 hectares constitute 74 percent of the total number of farmers in the country, though the area commanded by them is only 34 percent of the total cultivable area. As against Pakistan, in India small farmers are those who own holdings upto 5 acres (or 2.02 hectare) constituting 69.9 percent of the total number of farmers in the country, though the area commanded by them is only about 21 percent of the total area. The area of this size in Pakistan is adequate, from the viewpoint of income and productivity, to support life at subsistence level. As per information gathered from the field and evidence from research studies the average income derived from 12.5 acres (5 ha) land, varies from 7000 to 16000 rupees and for land holdings of 25 acres (10 ha), it varies from 19,000 to 25,000 rupees, depending on farm practices carried out and the level of improved inputs used. This is the average income which is earned by an extended family consisting of six members.