The Development of Institutional Agricultural Credit in Pakistan

The main purpose of this paper is to analyse the development of insti¬tutional agricultural credit in Pakistan since independence1. Although much has been written about the problems of rural credit in this country, tjie em¬phasis was usually on the role of the traditional village money-lender who was, and in many cases still is, the only significant source of credit for the small agriculturist2. Very little information is available on the operation of public or semi-public agricultural credit institutions, their relative growth in different areas of Pakistan, their sources of finance or their importance in view of the aggregate credit requirements. It is today generally recognized in advanced as well as in less developed countries that the credit needs of agriculture cannot be met from private sources alone. Government owned or government-supported credit institutions must carry significant burden of the credit supply to agriculture if any major development is to take place in that sector. Even in countries as highly developed as the United States, government agencies, such as the Farmer’s Home Administration, have been established to fill the big credit gap left by the commercial banking system. If private banks find it unprofitable in the United States to lend to agriculture on any significant scale, it is reasonable to expect this to be even more true in a relatively less developed country such as Pakistan. The need for government action in the rural credit field is further accentuated by the fact that many of the village money¬lenders (predominantly non-Muslim) left Pakistan after Partition and migrrated to India.