Agricultural Credit in Sindh: Issues and Recommendations

The importance of agriculture to the economy is seen in three ways: first, it provides food to consumers and fibers for domestic industry; second, it is a source of scarce foreign exchange earnings; and third, it provides a market for industrial goods. The Sindh province of Pakistan ranks second in agricultural production of the country. The crises in this key sector of the economy are on the rise since 1990ʹs. Presently, the province is facing serious crises such as; speedy land degradation, declining water resources, inadequate supply of seed, fertilizers, pesticides, slow process of mechanization, poor infrastructure, ill-conceived agriculture marketing, taxation policies, environmental, cultural hurdles and constraints in institutional credit system. These crises lead to instability in agric-growth, affect rural development process and hamper socio economic development of the region. The main goal of this paper is to evaluate institutional credit system in Sindh, sort out major obstacles through an over view and to provide policy recommendations for improvement in service delivery of these credit institutions in the best interest of growers. The improvement in service delivery will impact positively on agric / rural development in particular and socio economic development in general. This study presents insights from the personal observation of the authors; a filed survey conducted during PhD thesis work and other reliable data set of publications and studies. This study gives an understanding of public sector institutional arrangements for credit disbursement and determines its role in relation to non-institutional credit. The study explores the ideas that public sector credit institutions are mostly mismanaged and have lowest capacity to deliver according to the need of growers / rural households. Therefore, farmers rely more on non-institutional credit system than institutional credit system. But the high markup rate and other harsh terms and conditions of non-institutional sources strengthen vicious circle of poverty; creates problem of bonded labour, weakens growersʹ socio economic freedoms reduce investment powers and force their generations to be born in debt, live in debt and die in debt