MSc

Credit is one of the important interventions for improving agricultural
production and productivity and helps to mitigate farmers’ distress. Often,
institutional sources contribute only meagre percentage of agricultural credit to the
cost of cultivation. Non institutional sources are often tapped by the farmers to meet
the gaps in demand for agricultural finance, inspite of inherent weaknesses of higher
interest rate and rigid loan collection strategies. The study entitled ‘Institutional
preference for agricultural credit in Kasaragod district of Kerala’ was conducted
with the following objectives of (a) identifying the sources and extent of credit
availed by the farmers, (b) identifying the institutional preference for agricultural
credit with a view to analyse the factors affecting the institutional credit and (c)
identifying the constraints in availing agricultural credit.
The sample size of the study was 90 respondents, consisting of 30 each from
two grama panchayats of Kasaragode district viz., Parappa and Manjeshwaram from
two blocks Kasaragode and Hosadurg respectively selected by multi stage sampling
method. Data were collected through pre tested structured interview schedule. The
major statistical tools used for the study were Percentages, One way ANOVA, Log
Regression model, Independent samples Kruskal- Wallis test, Factor analysis, Mann-
Whitney U test were employed to analyse the data. Household location, sources of
agricultural credit and market location of the selected respondents in the sample
panchayats were plotted.
The results obtained after the analysis of sources and extent of credit availed
by the farmers revealed that 50 per cent of marginal farmers and 23 per cent each of
small & medium and large farmers were found to be devoid of institutional credit.
Some farmers have opted for leaving their farms uncultivated as there was no one to
look after the farm and tendency to avail the credit is less. About 40 per cent of the
large farmers have availed more than Rs. 1.5 lakh for cash crop cultivation and the
farmers who availed credit above 1 lakh remains slightly high. Marginal farmers
availed an average loan amount of Rs. 91,833, while that of a small farmer is as high
high as Rs. 2,18,500. The multiple comparison test proved that there is significant
difference in the total agricultural credit availed by large and marginal farmers.
Cooperatives are having an upper hand in disbursal of agricultural credit for
all the farmer categories followed by RRBs and public sector banks by concentrating
on smaller ticket loans. The farmers were found to have availed lesser borrowing
from microfinance institutions and private sources like moneylenders. The Log
linear regression analysis results showed that, area is the main predictor that
influenced the credit availed by farmers while other factors such as distance, number
of visits to bank, expenses, interest rate, age failed to have any influence.
Overall crop loan scheme utilization of 50 per cent is observed (i.e. 45 out of
90 respondent farmers are availing crop loan from either of the institutional sources).
For KCC, Overall almost 50 per cent utilization is observed (i.e. 42 out of 90
respondent farmers are availing KCC from all the institutional sources). Almost 40
per cent of the farmers are unaware about the AGL scheme. Results showed that an
average of 45 per cent of the farmers is not aware of the GCC scheme and gap in
awareness as well as utilization of this scheme is very less. . Overall 64.4 per cent of
the farmers unaware about the live stock schemes.
The second objective of the study was to identify the institutional preference
and factors affecting the institutional preference of farmers. The overall institutional
preference was estimated by combining the scores obtained for factors like
proximity, procedural hassles, banker’s behavior, approachability, flexibility, cost,
adequacy and timeliness. Reviewing the overall scores, marginal, small and large
farmers indicated co-operative banks to be their most preferred choice, followed by
RRBs as the next best alternative. The results of factor analysis showed that
institutional factors explain 36 per cent of the choice of institutional source and
credit related factors are responsible for 29 per cent choice of source of finance.
Further Independent samples Kruskal-Wallis test revealed that factors including
proximity, cost of credit, adequacy and timeliness do not have any influence on the
institutional preference by farmers. However, factors like procedural hassles,
approachability, banker’s behavior and flexibility are found to affect the choice of
source of finance.
Regarding problems experienced by the farmers, marginal and small farmers
are experiencing the problem in filling applications and understanding the schemes.
Eighty per cent of small and marginal farmers are not satisfied with interaction
pattern of commercial bank managers. Almost 93 per cent of marginal and small
farmers are facing problems in pooling the documents for submitting the loan
application. When the analysis was carried out separately for each type of farmer,
institutional preference was found to be affected by commonly experienced
problems while availing credit by marginal farmers.
Thus it may be concluded that demand for agricultural credit by farmers are
still not being satisfied in the expected pattern where marginal and small farmers
remain underprivileged due to various institutional and credit related factors
affecting credit delivery. Co-operatives are most preferred source of finance which
needs revival keeping in view of the present issue of demonetization.
Further it was suggested that, as micro credit could not make any significant
contribution for financing agrarian activity in the study area, micro credit channels
have to be improved for providing farmers with necessary finance. Financing
institutions, especially commercial banks should simplify their applications for loans
by removing the irrelevant details in the application forms. The scale of finance for
short term crops or crop loans and medium and long term agricultural loans in case
of organic farming may also be calculated and circulated to financing institutions by
the District Level Technical Committee (DLTC) and NABARD respectively.
The study has concentrated on preferences of institutions for different
categories of farmers while availing credit in Kasaragod district. Their extent of
utilization or misutilisation in the disbursed credit in the District was not an area of
enquiry in this study, which can be taken up for further inquiry by researchers, which
will be beneficial to the financing institutions also to expand their extent of credit and
also to contain their Non Performing Assets (NPA) in agriculture.