Contents
Preface
I. Introduction
II.
Meaning & Scope of Credit in Agriculture
III.
Objectives of Agricultural Credit
IV.
Factors Demanding Agricultural Credit
V.
Sources of Agricultural Credit
VI.
Co-operative Credit Structure
VII.
Classification of Agricultural Credit
VIII.
Critical Evaluation of the Cooperative Credit
System
IX. Conclusion
Preface
Agriculture in India is a developing enterprise, requires large investments on land for improving the cultural practices and ultimately increasing the production. These adequate credit support to production can be given only through institutional agricultural credit. Hence co-operative credit institutions playa significant role. This booklet provides ?:'i the necessary details of co-operative credit institutions in India viz. meaning, objectives, services, classification, and critical evaluation of co-operative credit systems in India
Dr. K. T. Chandy, Agricultural & Environmental Education
I. Introduction
Agriculture contributes to the biggest proportion (about 35%) of the Indian national income while rural areas account for the majority of our population (about 75%) in the country. Majority of the economic problems, thus lie in agriculture and rural areas. For solving these problems various efforts have been made for several decades in the past and they have to be continued for several decades in future. Provision of adequate, timely and cheap finance is an important aspect for the development of agriculture and allied activities.
Agriculture is a productive occupation and one of its essential input is finance or capital. This may be provided by the cultivator himself or like other enterprises, he may borrow it from some one else and repay it from the output of the field in which it has been invested. Unfortunately an Indian farmer is not able to make the maximum use of his time, labour and productive capacity of his land because of the lack of adequate credit facilities. This booklet throws some light on co-operative agricultural credit institution, which has become a main source of credit to the farmers.
II. Meaning & Scope of Credit in Agriculture
Credit has been regarded as a condition which enables a person to extend his control, as distinct from ownership of resources. It represents the borrowing power of the individual who wants to make use of certain resource during a certain period, through their temporary control, and promises to return them along with the price for temporarily using them. :
Agricultural credit is, thus essentially, an operation of securing money from one source or the other by creating the confidence that the amount of loan would be invested in productive operations so that the lender will get back the loan with interest as per agreement
Agricultural credit involves extending the net cultivable area by bringing waste and fallow land under cultivation, providing manures and fertilizers, protection of land, the provision of irrigation, making large amounts of fixed and working capital available to agriculture, changing farm organization, enlarging its share of gross national product and increasing labour return in agriculture. Adequate and timely finance enhances the withholding capacity by the producers and their bargaining position. Right type of credit also avoids: marketing problems. Credit, thus, injects an element of healthy competition and concrete commercial calculations in farm operations. The subsistence farming gives way to commercial farming, the simple process of production makes room for mechanized operations and Latitudinal changes sweep the length and breadth of the countryside. Agricultural credit can ignite the process of managerial skills involved in the farm enterprises. Thus, the role of credit consists in laying the foundation alone of farm revolution and maintaining the structure built upon it
III. Objectives of Agricultural Credit
The objectives of agricultural credit should be to:
1. improve the low standard of living of the agriculturists by making agriculture a business rather than a way of life;
2. increase the agricultural production and consequently strengthen
the farm economy; 3. develop the resourcefulness of farming
class;
4.
enable the farmers to adopt technological changes with ra view
to bring about improvement of agricultural production;
5. provide cheap credit for producing more through added inputs
and better farm management so that recovery could be made easily;
6. inculcate the habit of thrift and savings among the farmers
I through better use of capital;
7. supply credit to the farmers in adequate quantity, at a cheaper
rate of interest and at the time need;
8. provide both production and consumption credit to farmers
so that they are freed from the clutches of the money lenders;
and
9. establish a right equilibrium between the amount granted
and the degree of genuineness of the use to which credit is
to be put.
IV.
Factors Demanding Agricultural Credit
Agriculture is an important industry and like other industries
it also requires capital. Due to the peculiarities of agriculture,
especially its uncertainties, scattered operations, low returns,
small unit production, high rates of rent and limited scope
for employment, a large proportion of cultivators cannot manage
from one harvest to another without resource or borrowings.
Some of the factors demanding agricultural credit are discussed
here.
1. Uncertainties in agriculture
Agriculture is not a homogeneous industry but a complex system
with various types of production and marketing. Production takes
a lot of time since the inputs take time to transform it into
output. The amount of time involved in production is varied
according to the commodities. The longer the time period of
production, the more the element of uncertainty a producer is
exposed to. In farm production two uncertainties are prevalent
which demand agriculture finance. They are (a) yield uncertainty
and (b) price uncertainty.
a. Yield uncertainty:
The farmer cannot predict the yield he will receive from combining
particular quantities of inputs in the production. I Yield uncertainty
may result from disease or infestation of insects and climatic
variation. This situation compel the producer to borrow the
money from institutions or persons.
