A Critical Review of Rural Credit Policy in Pakistan

Lack of liquidity which acts as a constraint for agriculturaldevelopment has provided a rationale for rapid growth in formalagricultural credit in Pakistan since the early 1960s. Between 1959-60and 1991-92 institutional credit for the sector had registered an annualgrowth rate of 31 percent in nominal terms and 20 percent in real terms.The explosive increase in agricultural credit was accompanied by acreation of new financial institutions, the strengthening of alreadyexisting institutions and the adoption of credit policies to increasethe flow of credit for the sector in general and for small farmers inparticular. In this paper, an attempt is made to review farm creditpolicy in Pakistan in relation to its impact on agricultural growth andequity and to assess the strength of the credit institutions to keepcontributi~g effectively to the provision of credit in the ruralsector.