Lack of Access to Formal Agricultural Credit and Insurance

Access to agricultural credit is linked to the holding of land titles. As a result, small and marginal farmers, who account for more than half of the total land holdings, and may not hold formal land titles, are unable to access institutionalized credit.

• Farmers may require credit for short term uses such as purchasing inputs, weeding, harvesting, sorting and transporting, or long term uses such as investing in agricultural machinery and equipment, or irrigation.
• Farmers with land holdings of less than a hectare primarily borrow from informal sources of credit such as moneylenders (41%), whereas those with land holdings of two or more hectares primarily borrow from banks (50% or more).
• Other major sources of agricultural credit include shopkeepers, relatives or friends, and co-operative societies.

Key issues relating to agricultural credit are lack of access to formal credit owing to unclear land records, skewed ratio between short term and long term agricultural credit, and inadequate access to crop insurance.