Inequalities in Agri-Finance
The Pakistan Economic Survey sheds light on the credit disparity faced by small-scale farmers.
In the agricultural sector, approximately 25% of credit disbursement is allocated to farmers who own more than 50 acres of land.
The importance of agriculture finance has steadily risen in the past few years. By 2050, there will be a projected 70% surge in the demand for food. To meet this substantial increase, an estimated annual investment of at least $80 billion will be required, which can be financed by credit. In Pakistan, credit disbursement to farm and non-farm sectors has increased by 28% in FY23 according to the latest Pakistan Economic Survey. But is credit access distributed fairly and equally among individuals?
Similar to other crucial economic services, access to credit is characterized by unequal distribution, often favoring the elite and those in privileged positions. The latest Pakistan Economic Survey shows one such incidence, in the case of agriculture credit. In the agricultural sector, approximately 25% of credit disbursement is allocated to farmers who own more than 50 acres of land. Likewise, a significant portion of the total disbursement, approximately 35%, is utilized by large-scale farms.
According to an ADB report, it was found that only 64% of respondents utilize agricultural credit for intended farming purposes. Approximately 25% of the credit is diverted for personal uses, while the remaining 9% is utilized for side businesses. Pakistan is making progress in the right direction with an increase in agricultural credit disbursement, reaching 68% of the set target. However, there is still room for improvement, and further efforts are needed to fully meet the desired objectives.
Specifically, there is a need for policies aimed at streamlining and simplifying the credit process, making it more accessible for rural farmers. Additionally, establishing systems of accountability is crucial to ensure that credit is utilized for enhancing productivity. Furthermore, the provision of tools such as raising awareness about new technologies and keeping farmers informed about prices can help reduce uncertainty and support agricultural development.
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