Vulnerability Assessment of Formal and Informal Credit Borrowers: In Flood Prone Zone of Punjab, Pakistan

Abstract

In Pakistan, farmers are facing climatic and non-climatic challenges in retaining their output and profit. Their dependence on credit is increasing with passage of time. Previously, the factors behind availing credit policy are discussed in different studies, but there is no study found that empirically compares vulnerability of formal and informal farmers on the basis of credit facility in flood prone zone. For estimation and analysis, quantitative and qualitative measures are used. The quantitative measures are based on estimating vulnerability indices. The data were collected through survey of 146 households through multistage-stratified random sampling technique. The qualitative data focus group discussion which helps in sampling and investigate factors behind vulnerability of farmers. Results suggest that formal credit borrowers are more vulnerable than informal credit borrowers in terms of higher exposure and sensitivity and lower adaptive capacity. Formal credit borrowing farmers are affected by inefficiencies namely, late declaration of calamity, defective loss assessment, slow procedure of claim disbursement, meager amount of claims, political influence in listing of disaster affected village, and delayed credit payment operations. The higher vulnerability of formal credit borrowers raises need for overall improvement of credit policy of Crop Loan Insurance Scheme.