IMPACT OF INSTITUTIONAL CREDIT ON PRODUCTION EFFICIENCY OF FARMING SECTOR A Case Study of District Faisalabad

The paper highlighted the level of production efficiency of the farming sector in district Faisalabad in the Punjab province of Pakistan. Stochastic Frontier Analysis (SFA) technique was utilized at farm level survey data of 300 farmers for the year 2009. The overall mean efficiency score was 0.84 indicating 16 percent inefficiency of the sample farmers. The SFA estimation method also illustrated the parameters for the inefficiency. Farming experience, education, access to farming credit, herd size and number of cultivation practices showed constructive and significant effect on the farmer’s technical efficiency. The variable of credit showed highest coefficient value (–0.14) indicating the importance for the agricultural credit showing that availability of credit to farmers was much more important than any other factor to improve the resource use efficiency in agriculture sector.