Access to Credit and its Adequacy to Farmers in Khyber Pakhtunkhwa: The Case of Mardan District

Ensuring farmers’ access to agricultural credit market has been prioritized in agriculture financepolicies of Pakistan. The main objectives of this study are to explore farmers’ access to different formal and informal credit sources, and to investigate their credit adequacy and the role of important socio-economic factors in access to credit. The data were collected from 87 farming households in Mardan Tehsil of Mardan District. Questionnaire was the main tool used to collect the data from farmers. The credit access ratio formula was employed that measured farmers’ access, in relative terms, to their landholdings. Likewise, credit adequacy formula was used to investigate farmers’ credit adequacy. A probit model was employed to find the important factors affecting access to credit. Results of access to credit ratio showed that small farmers had lower credit access to formal sources compared to medium and large farmers, whereas they had more access to informal sources. Similarly, small farmers have more credit inadequacy compared to medium and large farmers, and most of their credit gap was filled by informal sources. Probit model results showed that experience, education, landholding size and total income had positive relationship with access to credit whereas, age and farmers’ group had negative association with access to credit. Our findings suggest that there is a need to revamp the policy to address the interests of small landholders, particularly those who possess land less than 5 acres because they had limited access to formal sources of credit.