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Orissa farmers depend more on informal credit says study

Wed, 05 Sep 2007 12:47:00
In the post- economic reform period, there has been a structural deterioration in distribution of bank credit to the agricultural sectors in rural areas as a result of which the farmers continue to suffer Deepak Kumar Mishra a researcher of Center for the Study of Regional Development (CSRD) of Jawaharlal Nehru University (JNU), New Delhi told Odisha.in in an interview.
By  
Ashis Senapati
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Kendrapada, September 5 (odisha. in) Large numbers of farmers in Orissa are depending on village moneylenders-a part of informal credit systems still thrive in rural areas of the state as formal credit providers such as bank or societies don’t listen to them a researcher found.

In the post- economic reform period, there has been a structural deterioration in distribution of bank credit to the agricultural sectors in rural areas as a result of which the farmers continue to suffer Deepak Kumar Mishra a researcher of Center for the Study of Regional Development (CSRD) of Jawaharlal Nehru University (JNU), New Delhi told Odisha.in in an interview.

Mishra has done an extensive study on the informal credit systems in rural India including Orissa.

"My study on the informal credit market in three villages of Sambalpur, Baragarh, and Kalahandi districts of Orissa throw up some interesting insights on the way inputs(land, labour, credit, fertilizers ,pesticides ) and outputs (mainly paddy) get contractually interlinked.

The date shows that the poor and marginalized peasants borrow more from the informal credit market. Even some large farmers also borrow money from the informal sources, particularly in the irrigated villages, he said.

Access to formal credit is typically low particularly for the landless labourers and small farmers", wrote Mishra in his research paper.

For the landless labourers and the marginal farmers, moneylenders and shopkeepers are the two most important sources of borrowing, while small and semi-medium farmers borrow largely from traders-besides the moneylenders.

Traders are also the most important source of informal credit for medium and large farmers.

One key finding of Mishra’s study is that scheduled caste and scheduled tribe households as well as landless labourers and small farmers, pay higher interest rates in comparison with others.

Borrowers typically sell their output at a lower price than others; the price difference is highest in the backward-un-irrigated village and lowest in the advanced irrigated village.

Although lack of access to cheap (not just in terms of interest rates but also in terms of transaction and other costs of getting credit), dependable and timely credit has acted as a major catalyst of the current agrarian crisis, it is important to note that the factors, which has generated and sustained distress of such magnitude are, at least partly, structural and it requires more than cosmetic and one-time "miracle package " to address these issues.

Today, the conventional notion of agrarian distress as being part of the broader landscape of underdeveloped agriculture and backwardness no longer holds true.

 Agrarian distress and indebtedness has also been reported from regions where agriculture has attained a high degree of commercialization, where technology use is relatively better and the cropping pattern is diversified, he said.

Agrarian distress in rural India seems to have at least two important dimensions: distress under backwardness and distress under commercialization, wrote Mishra in his research paper.

Farmer's suicides in many states are of course, not the only indicators of agrarian distress. But they do bring into sharp focus how the rural credit system -or the absence of it- works against agriculturists.

More often than not, farmers who took the extreme step had borrowed from informal sources at exorbitant rates of interest.

According to the 59th, round date of the National Sample Survey, the moneylender was the most important source of loan for agriculturists in the country. In 2005, 29 percent of all indebted farmers had borrowed from village moneylenders.

The share of agricultural credit by the banking sectors has declined in eastern states including Orissa from 15.9 percent in March to 9.9 percent in 2005, finds Mishra in his study.

Odisha.in

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