AGRI CREDIT AND SMALL LANDHOLDERS

TARIQ AHMED SAEEDI
(feedback@pgeconomist.com)
Dec 13 - 19, 20
10

Adequate availability of funds to the farming community can bring a revolutionary change in the agriculture sector of Pakistan. Lack of financing is the major hurdle in the way of upgrading the sector at par with the international standards; thereby even agriculture growth has not been able to reduce the poverty incidence in the country. While inadequate development expenditures are the reason of underdevelopment of the sector, yet private financing is also not playing its role to upgrade the sector.

While agri credit off-takes are increasing year on year, it cannot be decisively said which class of the society is in majority availing the financing facility. The banks are obviously focussing on to verify the repayment ability of the borrowers before sanctioning loans and not that which class he belongs. Given the ability of the big landholders to have a better access to agri financing, small landholders are neglected as a result. Similarly, female farm workers are also given less importance over their male counterparts. This is contrary to the demographic concentration of agriculture sector depending on small landholders including women toiling for the production.

Small landholders constitute 60 to 70 percent of the population associated with the agriculture to earn livelihoods in most of the developing countries. In Pakistan, the proportion of land holding is rather more skewed, giving rise to the poverty. United Nations Food and Agriculture Organization said in its latest report, "Large numbers of rural people [in Pakistan] are poor because of unequal land distribution. A few large landholders own a disproportionate amount of land. More than 4 million family farms have plots of less than 5 hectares [12.5 acres], and 25 per cent of all farms consist of less than 1 hectare [2.5 acres]. At present about 50 per cent of farmers own and operate their farms, while 26 per cent are tenant farmers. Sharecroppers who work lands belonging to large-scale farmers are often in debt to their employers." Because of the limited outreach of agri credits, small famers meet their monetary needs by getting loans from the informal sector, which does not only provide loans against exorbitant interest rates, but also make them entrapped into the clutches of loaner who puts up harsh conditions to loan provision.

Different political parties have been emphasizing on the importance of land reforms to ensure equal distribution of agriculture lands. Agriculture experts said land reforms would improve the quantity of agriculture outputs since equal distribution means optimal utilisation of fields. At present, large tracts of lands are lying uncultivated partly because of water scarcity and mainly because of unwillingness of the holders to make them cultivated. A coalition partner of the ruling party, Muttahida Qaumi Movement recently proposed a legislation that seeks redistribution of lands to landless and small farmers and redefining of landholdings. 'Redistributive Land Reforms Bill-2010 consists of laws to bind a farmer to hold in ownership not more than 36 acres if land is irrigated and 54 acres if it is non-irrigated. The bill is aimed at to do away with the feudalism, which perpetuates subjugation of small farmers and makes them non-beneficiary to the outcomes of growth in agriculture sector. Unfortunately, previous attempts to redistribute farmlands have been resisted by the feudal lords who were not ready to surrender parts of their inherited farmlands.

Critics said government's agriculture policies also do not make difference to the lives of small farmers who are latched to subsistence production notwithstanding introduction of export-oriented policies. The agri credit outreach is not pervasive, depriving many deserving candidates of required funds to improve their agriculture means. This results in not only low productivity, but also limited farm incomes. Credit allocations to farmers are kept on increasing every year, but are such expansion effective is questionable. Ground reality is telling a different story: rural poverty is on the rise or people in many parts of rural areas are living under inhuman conditions with no basic education, health, and sanitations. Their incomes can hardly get them proper meals a day, let alone appropriate medications at the time of health complications. Whether state initiatives lack capability to increase farm incomes and productivity or wealth is awfully concentrated in few hands.

This year floods devastated the agriculture sector, in particular, damaged the standing corps. The impact of floods is widespread in the rural economy of Pakistan and the disaster has left a deep scratch on the agriculture sector necessitating the expansion of finance to help the sector heal its wounds. State Bank of Pakistan has taken few initiatives to get the flood-affected farmers come out of trouble, for instance, by launching Rs10billion refinancing scheme at concessionary rate of eight percent.

The recent price hikes of agriculture inputs aggravated the poverty incidence in Pakistan. It is contrary to the reasoning that when prices of agriculture products increase in international market, it should have scaled down the poverty level since majority of work force in the country belong to the occupation of agriculture. In reality, the case is opposite. Still, poverty is an uncontrollable phenomenon in Pakistan; 80 percent of the country's poor live in the rural areas. Undernourishment and poverty is closely related to each other. It is debatable which is the cause and which is the effect: undernourishment causes poverty or latter results in the former. FAO's report on Agriculture towards 2015/2030 said, "Under-nourishment is not merely a symptom of poverty but also one of its causes. Poverty is not simply a lack of income or consumption but includes deprivation in health, education, nutrition, safety, legal and political rights, and many other areas. All these dimensions of deprivation interact with and reinforce each other."

Both state and private financing to small landholders or landless farmers is essential to pass on the benefits to the underserved community and improve agriculture productivity.