Impact of Agricultural Credit on Cereal Productivity: Case Study of District Sargodha, Punjab Pakistan

Abstract

Agriculture is a major sector of Pakistan’s economy, as it contributes significantly to Pakistan’s economy by providing GDP, jobs, and export income. In recent decades, the financing needs of farmers have increased rapidly due to a restructuring of the agricultural sector. Credit is seen as an important factor in raising farmers’ production and profits. The current study seeks to examine the impact of credit on the productivity of cereal in the Sargodha District. In addition, the study examines farmers’ objective to receive loans and major credit sources in the Sargodha district. This study is based on the primary data from the 8 villages in Sargodha-Punjab district, Pakistan collected in 2018. The area was divided into four zones, and from each zone, two villages were chosen. The same number of beneficiaries, i.e. ten each, from each village was selected. The sample size, therefore, referred to 160 farmers. The data were analyzed using the Cobb Douglas Production Function (CDPF). The results of the study show that credit has a positive effect on the productivity of wheat. Research has shown that only 30% of the credit users use loan to buy seeds and fertilizers and 70% use loan for other purposes, such as marriages and ceremonies and farmland and tractor buying, among others. Similarly, Zarai Tarqiati Bank Limited (ZTBL) loans 80 percent of credit customers. It is recommended that the financial institution expands the credit facilities exclusively for agricultural farmers. Credit restrictions should also be reduced plausibly so that smallholders can easily obtain loans.