Introduction

Agricultural sector has been one of the main sectors lubricating the industrial sector as well
as the overall growth of the economy of the developing economies. In the past, it was viewed
as the passive sector in the development process. In the last few years, however, it has been
taken as an active sector and as co-partner of the industrial sector in the development process.
In the less developed world where majority of the people depend on agriculture as a source of
livelihood and a significant portion of domestic value added comes from agricultural sector, it
has been one of the widely discussed public policy topic. Different issues pertaining to
agricultural sector hit the discussions and dialogues among policymakers of the
underdeveloped economies while formulating, implementing and evaluating the policies
concerning agricultural sector. Some of them are: increased use of modern techniques of
production, availability of modern and efficient irrigation system, use of improved seeds,
availability of fertilizer and easy access to agricultural credit. Among these factors, the last
one has attracted thoughtful attention of public policy makers; because once farmers have an
easy access to credit,, they can intensify the use of improved seeds, fertilizer and mechanized
techniques of farming. Thus, it is considered as one of the strategic resources playing a
decisive role in the development of an underdeveloped economy. Institutional credit has been
an important lever in this effort. Indeed, as policy initiatives were taken focusing on
institutional credit and have been implemented since 2000 to bolster the agricultural sector.
They have contributed, both explicitly and implicitly, to improve institutional lending to
agriculture in the last decade.

Objectives

The Specific objectives of this study are:

 To find out the ratio of credit used for purchasing various agricultural inputs
 To assess the level of utilization of agricultural credit
 To examine the impact of agricultural credit on agricultural production

Performance of agricultural sector of Kerala is showing a declining trend. Agricultural sector

faces both opportunities and challenges with liberalization and global marks. One of the
major challenges is the lack of credit availability and inability of farmers to repay debt. In
order to improve the growth performance of agriculture there should be better supporting
system. The role of institutional agricultural financing is very important here.

To accelerate the performance of agricultural sector along with adequate credit availability
proper and optimal utilization of credit should be ensured. Productivity of agricultural credit
is a key determinant of growth of agricultural sector in Kerala the productivity of agricultural
credit is low.

Methodology

The study is purely based on primary data. The sample population for this study comprises of
agricultural credit borrowers of Kodiyathoor Grama panchayat. The sample population was
surveyed to understand the characteristic of the borrowers, distributions of agricultural credit
among various inputs, productivity of agricultural credit and its utilization.

Conclusion and Findings

Findings

 We can find the that 32% of borrowers of agricultural credit belongs to the category
of those possessing an area of land between 2-3 acres.
 Majority (52%) of the borrowers possess an area less than 2 acres
 Number of persons borrowing agricultural credit is less among the category of
borrowers with higher area of land
 Cultivation is the main occupation for a good majority (52%) of the respondents.
 Number of borrowers of agricultural credit in the sample are lower(6%) in private
sector.
 Share of agricultural income is higher (67%) among the borrowers possessing an area
of land more than 4 acres and lowest (3%) among the category of borrowers with less
than 1 acre of land. Agricultural income increases with the increase in the amount of
land holding.
 On an average 28% of the loan is availed by the category of the borrowers with an
area of land between 3 to 4 acres. Average share of the total credit availed by the
category of borrowers with an area of land less than 1 acre is the lowest.
 All borrowers own TV and refrigerator. 92% have concreted houses and two
wheelers. 52% owns a four wheeler. Only 44% owns a computer. It means that
agricultural beneficiaries are having necessary assets at their possession.
 There is wide disparity in the distribution of average amount of income and credit
among sample borrowers having area of land less than 4 acres.
 The only category of borrowers with average amount of income higher than average
amount of borrowing is those possessing an area of land above 4 acres.
 Credit is an important source of fund for agriculture. 92% of the sample borrowers
prefer credit from co-operative banks and 8% of the borrowers prefer credit from the
commercial bank.
 Another important finding in connection with cost of borrowing is the rate of interest
is lower for agricultural credits.
 Agricultural credit is used to purchase different inputs. Among that major
portion(44%) of the credit is used to purchase fertilizers, least amount of credit is used
to purchase labour hours. Agricultural credit is not used to purchase land.
 40% of borrowers have fully utilized the credit for agricultural purpose. 34% of
borrowers have partially utilized the credit for agricultural purpose. 26% of borrowers
have lease utilized the credit for agricultural purpose.
 33% of the total amount of credit is fully utilized for agricultural purpose. 50% of the
total amount of credit is partially utilized for agricultural purpose.
 70% of total agricultural credit was used for agricultural purposes. 30% of agricultural
credit was used for non agricultural purposes like financing marriage, vehicle
purchases, construction of buildings and depositing agricultural credit for gaining
arbitrage interest.
 The category of borrowers with above 4 acres have utilized the entire amount of
agricultural credit. The category of sample borrowers below one acre of land have
least (18%) utilized their agricultural credit.
 For 56% of the borrowers, agricultural loan has not made any improvement in
income. For 32% of the borrowers agricultural credit has improved their income.
  Majority of borrowers(58%) has the opinion that agricultural credit has not improved
agricultural productivity. Agricultural credit has enhanced the agricultural
productivity for 40% of borrowers.
 Volatility of the prices of agricultural goods is the major problem in agricultural
sector. Second most important problem is of lack of capital
 Majority (72%) of the sample borrowers has the opinion that loans on subsidized
interest rate is the solution for agricultural problems.
 67 per cent beneficiaries reveal that most of the time they always have sufficient
income for the repayment of the loan amount.
 Most majority of the borrowers(64%) use the loan facility for the repayment of old
loan.
 68 per cent of the borrowers make default in the repayment of loan
 Major reasons for the default are crop failure, fall in price and unexpected
contingencies respectively.

Suggestions

 Measures should be taken to ensure the fulfilment of purpose of credit.

 Productivity of agricultural credit should be increased.
 Govt. should ensure stable prices for agricultural goods.
 Level of utilization of agricultural credit should be increased.
 Repayment capacity of agricultural income should be properly ensured before
sanctioning loans.
 Effective measures should be taken to solve the problem of making credit default.

Conclusion

Agricultural income and are of land are positively related. Only half of the total amount of
agricultural credit is fully utilized. It means rest of the credit is not properly used to fulfil the
objective of lending. Full utilization of amount of credit and area of land are positively
related. There is wide disparity between agricultural income and credit. Level of credit is
much higher than borrower’s income.
Volatile prices of agricultural goods, lack of capital, crop disease, improper irrigation, lack of
fertilizers, lack of availability of improved seeds are the main problems faced by farmers.
Provisions for subsidized loans, improved irrigation facility, provision of subsidized seeds,
stabilization of agricultural prices etc are the possible solutions to problems of the
agricultural credit.

The agricultural loan borrowers have to face many problems in the repayment of the loan
amount. The problems arise due to different reasons and an attempt is made to analyze such
problems. The problems arise due to insufficiency of agricultural income, unreasonable
instalment amount, availing of fresh loan for repayment of old ones and its sources, defaults
and reasons for default and action taken by bank on default. It is noted that the insufficiency
of agricultural income to repay the loan amount leads to continuous renewal and
multiplication of agricultural loans.

In the agriculture sector, it is a common practice to renew the existing loan for the repayment
of the old loan or avail another loan for the same purpose. It is observed that this tendency is
mainly due to insufficient return from the agricultural activities or diversion of funds for
other purposes. Default in repayment of loan is not a serious problem because number of
defaulters is lower.

Agricultural credit has not helped to enhance the agricultural productivity of the farmers.

Farmers are getting credit by paying moderate interest rates. But price fluctuation unseen
contingencies etc. are the problems in agriculture which decreases the agricultural income.
Thus, policy makers should ensure that the farmers get as much credit as they need at a
subsidized interest rate. It will enhance their access to improved seeds, use of fertilizer and
pesticides, better irrigation facilities and mechanized methods of production which will
ultimately increase the productivity of farmers.