How agricultural credit is a source of survival for small farmers


A few years ago, when Chayatai Parkhi’s husband Ashok ended his life because he was unable to pay debts from banks and pawnbrokers, Chayatai was forced to take another loan from a pawnbroker to perform a series of religious rites after her husband’s cremation. Ashok had taken out a loan for his daughter’s marriage and dowry. As the harvest failed, he went into depression and ended his life. But even after Ashok’s death, the family continues to rely on loans to meet their farm and non-farm needs. For villagers in the remote village of Hatwanjari in Maharashtra’s Yavatmal district, this is nothing new. The majority of small and marginal farmers in the region are entirely dependent on loans, not only for agricultural purposes, but also to take care of their children’s school education, weddings, ceremonies and medical emergencies.
Lending sources, purposes
The Status Assessment of Farm Households and Household Land and Farms in Rural India, 2019 (NSS 77th Round) showed that of the total loans given to rural households with less than 0.01 hectare of land, 50% came from professional lenders while 13 percent came from regular commercial banks. For households with land between 0.01 and 0.40 hectares, 17% of loans came from professional lenders and 34.8% from regular commercial banks. The Agricultural Census classified marginal farmers as those with less than 1 hectare of land and those with 1-2 hectares as small farmers. However, more than 86% of the country’s farmers are small and marginal. The majority of marginal farmers had received loans from non-institutional sources. Households with land of less than 0.01 hectare used 71% of the total loan from non-institutional sources and 28% from institutional sources. In contrast, for households with more than 10 hectares of land, 69% of loans came from institutional sources. About 93.1% of total loans to households with less than 0.01 hectare of land were for non-agricultural purposes. Households with 0.01 to 0.04 hectares of land used 71 percent of loans for non-agricultural purposes. Households with land between 0.41 and 1 hectare used 54 percent of total loans for non-agricultural purposes.
Capital expenditure, income
Of the total loan obtained from various institutional and non-institutional sources, households with less than 0.01 hectare of land used only 2.6% of the loan for capital expenditure in an agricultural enterprise and 42% for education and for medical purposes. About 13 percent of the loan was used for weddings and ceremonies and 4 percent for farm business income expenditures. Capital expenditures in the farming business, i.e. expenditures incurred for the purchase of land, land rights, reclamation of land for the farming business, new purchases, etc., increased with the increase in land ownership. Revenue expenditure incurred for the purchase of seeds, manure, fodder, payment of wages also increased with land ownership.
Ready for survival
Data showed that small landowner households used loans for medical expenses for hospitalization, doctor’s fees, purchase of drugs, medical diagnostic tests and other pathological tests. These households also depend on loans for other consumption expenditures, including the purchase of durable household assets, clothing for household use, etc. The data showed that rural households are not only facing an agrarian crisis, but the struggle for survival has worsened.

Published on

January 15, 2022


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