Types, Sources and Importance of Agricultural Credits in Pakistan

In Pakistan the agricultural sector have been playing a vital role in increasing agricultural productivity and income of the rural households. In this sector, agricultural credit requirements have increased over the time due to several problems including rising prices of main agricultural inputs, shortage of water and poor irrigation systems. The purpose of this study was to review previous studies and examine the types, sources and the importance of agricultural credits in the country. Secondary data have been obtained Economic Survey of Pakistan and Agricultural Statistic of Pakistan. The results of this study showed that the institutional credit plays a significant role in the development of the agriculture and ultimately the development of the economy. Results further revealed that there is a positive correlation between credit supply and the augmentation of agriculture produce in the country. Furthermore, the literature exposes that both financial institutions and farmers are facing issues, such as risk of loan recovery, and limited information about the credits, etc. Therefore, the study recommended that the government of Pakistan should establish new Village Township Banks (VTBs) in rural areas which will be a useful financial mechanism to solve the problems of farmers.