Technological Change and Credit Requirements in Agriculture : A Study of Two Villages in North Bengal

Abstract

This thesis is a study of agricultural finance in the context of the adoption of modern agricultural technolo­gy. The data used in the study are based on the survey of 13) farmers from two villages Ekdala and Ramjibanpur which respectively represent agriculturally advanced and tradi­tional villages in the district of Rajshahi. The villages were selected purposively, while the farmers were selected by adopting stratified random sampling design. The select­ed farmers in each village were classified into seven size categories. The requirements of credit, the supply of credit, the share of different agencies, the utilization patterns, the interest rates and the existing credit gaps were studied and compared between the villages and among the size cate­gories as well. It has been observed that farms adopting superior techniques of cultivation reported substantially higher credit requirements per household and per bigha compared with those on traditional farming. The analysis of purposewise requirements of credit showed that non-agricul­tural expenses accounted for the largest share of the total requirements followed by capital expenses, and current ex­penses in that order in both irrigated and unirrigated villages, and higher non-agricultural requirements of credit of the Ekdala sample households have emanated from non-food requirements. The relative proportion of credit allocated for agricultural purposes, however, appeared to have subs­tantially increased in our present study. In respect of agricultural expenses, our results provide strong evidence in favour of the hYPothesis that large farmers exhibit a considerably greater requirement of external finance compared with their smaller counterparts. It has further been observed that though the contri­bution 0£ the institutional agencies to total borrowings of the cultivators has increased considerably, yet non-insti­tutional agencies continue to have a dominant though decli­ning influence in the rural credit market. Non-institution­al agencies supplying major portion of the loans played very important role for the farmers in tl'B smaller size categories of farms. In both Ram.jibanpur and Ekdala, farmers belonging to the larger size categories received larger proportion of their loans at cheaper interest rates while smaller farmers paid exorbitant rates for larger parts of their total loans. Both cheap and institutional credit are being unevenly distributed, as interest free loans are gradually becoming unavailable to the cultivators. Larger farmers appropriat­ed institutional loans more than proportionately tor- their shares in land. A big credit gap exists in both Ram.jibanpur and Ekdala. Farmers in both the villages bridged a portion of the requirements by undertaking disinvestment of assets. An overwhelmingly large proportion of disinvestment of assets was caused by the demands of non-agricultural expen­diture. There is thus a need to reformulate the credit policy in consonance with the growing technological needs and by taking into account the dismal condition of the smaller farmers.