Is inadequacy of institutional credit a problem in changing agriculture

Abstract

An earlier study had indicated that farmers ten l to suibstitute commercial bank credit for their own futnds and/or for other sources of finance, and that this substitution has no significant impact on frmi production. This article is therefore based on the connected question: "Is inadequacy of the existing institui tional credit facilities a problem in changing agriculture?". Tho question is important because of the widespread not.ion that inadequacy of credit is a serious bottleneck in the adoption of the new technology. The second study indicates that the existing availability of uw()rking capital, including credit, with the sample farmers is not inadequate to meet the requirements of technological changes in agriculture. There does, however, exist significant scope for the reallocation of existing credit facilities, WVithdrawal of institutional credit from farmers who have adequate owned resources and its provision to the needy' farmers would greatly increase efficiency of credit use. In fact, credit management involves proper scrutiny of individual loans and an emphasis by credit suppliers on their own developmental role. With a proper understanding of the developmental role and efficient allocation of credit, much could be achieved even with the existing resources of institutional finance.