DETERMINANTS OF FAILURE IN INFORMAL AGRO-FINANCE- A STUDY OF RURAL AREA OF KHYBER PAKHTUNKHWA, PAKISTAN
Keywords:
Informal sources, formal sources, agricultural finance, financial institutions, farmers, agriculture, rural areas, local farming
Abstract
Being a developing country, Pakistan finds most of its farmers facing very meager economic conditions. Owing to this, they are incapable to manage expenses of their various agricultural requirements and provisions; including basic agricultural inputs and machinery. In order to overcome these issues, through the most simple and conceivable means, they opt to secure financing from numerous resources, the most important of which are informal financing sources. However, there are some drawbacks related to informal finance that makes its usage less appealing. These include the practice of charging an exorbitant interstate, the lack of appropriate legal documentation, the provision of insufficient funds, and reliance on trust. The empirical data was collected from farmers who, frequently avail informal finances, and have similar publicized shortcomings. The present study was conducted to critically analyze - theoretically as well as practically, through empirical research, the downsides of informal financing.References
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Constraints and options. Pakistan Journal of Life and Social
Sciences, 6(1), 47-49.
Bhattacharjee, M., & Rajeev, M. (2010). Interest rate formation in
informal credit markets in India: does the level of development
matter?. Brooks World Poverty Institute Working Paper, 126.
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Sectors in Developing Countries/Les Relations Entre Les
Secteurs Financiers Formels Et Informels Dans Les Pays En Voie
De Developpement. Savings and Development, 14(11), 5-22.
Guirkinger, C. (2005). Risk and the persistence of informal credit in rural
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California Davis.
Gulaid, M. A. (1995). Financing agriculture through Islamic modes and
instruments: Practical scenarios and applicability. Islamic
Research and Training Institute, Islamic Development Bank.
Jan, I., Munir, S., Usman, A., & Idress, M. (2012). Agricultural credit
markets in northwest Pakistan: implications for the development
policy.Sarhad Journal of Agriculture, 28(3), 521-529.
Jeromi, P. D. (2007). Regulation of Informal Financial Institutions: A
Study of Money Lenders in Kerala. RBI Occasional Papers.
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accessed June 5, 2014, http:// www.pakissan.com/.../outlook.for.
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financing on agricultural production in the rural economy of
Kwara State, Nigeria. International Journal of Business and
Social Science, 2(19), 241-248.
Malik, S. J., & Nazli, H. (1999). Rural poverty and credit use: evidence from
Pakistan. The Pakistan Development Review, 38(4), 699-716.
Mohan, R. (2006). Agricultural credit in India: Status, issues, and future
agenda. Economic and Political Weekly, 1013-1023.
Owuor, G., & Shem, A. O. (2012). Informal Credit and Factor Productivity
in Africa: Does Informal Credit Matter?. In 2012 Conference,
August 18-24, 2012, Foz do Iguacu, Brazil (No. 126624).
International Association of Agricultural Economists.
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Pakistan MicroFinance Network.
Quartey, P., Udry, C., Al-hassan, S., & Seshie, H. (2012). Agricultural
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marketing and credit outcomes in Ghana. Institute of Statistical,
Social and Economic Research, University of Ghana.
Reddy, Y.V. (1999) Future of Rural Banking, Prof. G. Ram Reddy Third
Endowment Lecture by Dr. Y.V. Reddy, Deputy Governor,
Reserve Bank of India, Potti Sreeramulu Telugu University
Auditorium Public Gardens, Hyderabad, December 4, 1999.
Schaefer-Kehnert, W., & Von Pischke, J. D. (1986). Agricultural Credit
Policy in Developing Countries/ Politique De Crédit Agricole Dans
Les Pays En Développement. Savings and Development, 5-29.
Shah, M. K., Khan, H., & Khan, Z. (2008). Impact of agricultural credit on
farm productivity and income of farmers in mountainous agriculture
in northern Pakistan: a case study of selected villages in district
Chitral. Sarhad Journal of Agriculture (Pakistan). 24(4), 713-718.
Tang, S., Guang, Z., & Jin, S. (2010). Formal and informal credit markets
and rural credit demand in China. Paper selected for presentation
at the Agricultural and Applied Economics Association. Accessed
June 24, 2014. http://ageconsearch.umn.edu/.../Formal%20
and%20Informal%20Credit%20Ma.
Tilakaratna, S. (1996). Credit schemes for the rural poor: Some
conclusions and lessons from practice. International Labor
Office, Development, and Technical Cooperation Department.
Timmer, C. P., Falcon, W. P., Pearson, S. R., & World Bank. (1983).
Agriculture and Rural Development Dept. Economics and Policy
Division. Food policy analysis, 1-301. Baltimore: Johns Hopkins University Press.
Turvey, C. G., & Kong, R. (2010). Informal lending amongst friends and
relatives: can microcredit compete in rural China?. China
Economic Review, 21(4), 544-556.
Yehuala, S. (2008). Determinants of smallholder farmers access to formal
credit: the case of Metema Woreda, North Gondar,
Ethiopia. Unpublished thesis) Faculty of the Agriculture,
Department of Rural Development and Agricultural Extension,
School of Graduate Studies, Haramaya University.
Zeller, M. (2003, June). Models of rural finance institutions. In Paving the Way
Forward for Rural Finance: An International Conference on Best
Practices, June. Accessed June 21, 2014. http://www.gwdg.de/~uare.
Constraints and options. Pakistan Journal of Life and Social
Sciences, 6(1), 47-49.
Bhattacharjee, M., & Rajeev, M. (2010). Interest rate formation in
informal credit markets in India: does the level of development
matter?. Brooks World Poverty Institute Working Paper, 126.
Elhiraika, A. B., & Ahmed, S. A. (1998). Agricultural credit under
economic liberalization and Islamization in Sudan. African
Economic Research Consortium (AERC).
State Bank of Pakistan. Executive Summary, Accessed May 21, 2014.
http://www.sbp.org.pk/report/ExecutiveSummary.pdf.
Floro, S. L. (1987). Technical change and the structure of informal credit
markets in Philippine agriculture. International Rice Research
Institute. Accessed June 23, 2014. http://serp-p.pids.gov.ph/serpp/
download.php?d=487.
Germidis, D. (1990). Interlinking the Formal and Informal Financial
Sectors in Developing Countries/Les Relations Entre Les
Secteurs Financiers Formels Et Informels Dans Les Pays En Voie
De Developpement. Savings and Development, 14(11), 5-22.
Guirkinger, C. (2005). Risk and the persistence of informal credit in rural
Peru, Agricultural and Resources Economics. University of
California Davis.
Gulaid, M. A. (1995). Financing agriculture through Islamic modes and
instruments: Practical scenarios and applicability. Islamic
Research and Training Institute, Islamic Development Bank.
Jan, I., Munir, S., Usman, A., & Idress, M. (2012). Agricultural credit
markets in northwest Pakistan: implications for the development
policy.Sarhad Journal of Agriculture, 28(3), 521-529.
Jeromi, P. D. (2007). Regulation of Informal Financial Institutions: A
Study of Money Lenders in Kerala. RBI Occasional Papers.
Kaleem, A. (2007) Outlook for Islamic financing of agriculture, March 2007,
accessed June 5, 2014, http:// www.pakissan.com/.../outlook.for.
islamic.financing.of.agriculture.shtml.
Lawal, D., & Abdullahi, F. D. I. (2011). Impact of informal agricultural
financing on agricultural production in the rural economy of
Kwara State, Nigeria. International Journal of Business and
Social Science, 2(19), 241-248.
Malik, S. J., & Nazli, H. (1999). Rural poverty and credit use: evidence from
Pakistan. The Pakistan Development Review, 38(4), 699-716.
Mohan, R. (2006). Agricultural credit in India: Status, issues, and future
agenda. Economic and Political Weekly, 1013-1023.
Owuor, G., & Shem, A. O. (2012). Informal Credit and Factor Productivity
in Africa: Does Informal Credit Matter?. In 2012 Conference,
August 18-24, 2012, Foz do Iguacu, Brazil (No. 126624).
International Association of Agricultural Economists.
Qadir. A. (2005). A Study of Informal Finance Markets in Pakistan.
Pakistan MicroFinance Network.
Quartey, P., Udry, C., Al-hassan, S., & Seshie, H. (2012). Agricultural
financing and credit constraints: the role of middlemen in
marketing and credit outcomes in Ghana. Institute of Statistical,
Social and Economic Research, University of Ghana.
Reddy, Y.V. (1999) Future of Rural Banking, Prof. G. Ram Reddy Third
Endowment Lecture by Dr. Y.V. Reddy, Deputy Governor,
Reserve Bank of India, Potti Sreeramulu Telugu University
Auditorium Public Gardens, Hyderabad, December 4, 1999.
Schaefer-Kehnert, W., & Von Pischke, J. D. (1986). Agricultural Credit
Policy in Developing Countries/ Politique De Crédit Agricole Dans
Les Pays En Développement. Savings and Development, 5-29.
Shah, M. K., Khan, H., & Khan, Z. (2008). Impact of agricultural credit on
farm productivity and income of farmers in mountainous agriculture
in northern Pakistan: a case study of selected villages in district
Chitral. Sarhad Journal of Agriculture (Pakistan). 24(4), 713-718.
Tang, S., Guang, Z., & Jin, S. (2010). Formal and informal credit markets
and rural credit demand in China. Paper selected for presentation
at the Agricultural and Applied Economics Association. Accessed
June 24, 2014. http://ageconsearch.umn.edu/.../Formal%20
and%20Informal%20Credit%20Ma.
Tilakaratna, S. (1996). Credit schemes for the rural poor: Some
conclusions and lessons from practice. International Labor
Office, Development, and Technical Cooperation Department.
Timmer, C. P., Falcon, W. P., Pearson, S. R., & World Bank. (1983).
Agriculture and Rural Development Dept. Economics and Policy
Division. Food policy analysis, 1-301. Baltimore: Johns Hopkins University Press.
Turvey, C. G., & Kong, R. (2010). Informal lending amongst friends and
relatives: can microcredit compete in rural China?. China
Economic Review, 21(4), 544-556.
Yehuala, S. (2008). Determinants of smallholder farmers access to formal
credit: the case of Metema Woreda, North Gondar,
Ethiopia. Unpublished thesis) Faculty of the Agriculture,
Department of Rural Development and Agricultural Extension,
School of Graduate Studies, Haramaya University.
Zeller, M. (2003, June). Models of rural finance institutions. In Paving the Way
Forward for Rural Finance: An International Conference on Best
Practices, June. Accessed June 21, 2014. http://www.gwdg.de/~uare.
Published
2018-01-15
Section
Articles
