Some aspects of rural credit in East Pakistan

The poverty of farmers and the backwardness of agriculture are both cause and effect of a lack of capital, and crediting the, rural areas of East-Pakistan. They are cause because they make it almost inevitable that when loans are obtained they are misused, and consequently potential lenders are chary of putting their money into agriculture. They are the effect of a lack of credit and capital in the sense that changes in methods which might increase agricultural productivity have been held up for lack of finance. These considerations have not, however, prevented farmers from becoming heavily indebted and this study examines the purposes for which money is borrowed in the rural areas and the sources of finance. It shows that most of the rural debt is owed to non-institutional lenders of one kind or another and that the institutional lenders - banks, agricultural credit institutions, co-operative credit institutions etc - have made very little contribution to the total supply of credit. The study concludes with an estimate of total credit requirements and argues that if the gap between supply and requirements is to be met, institutional lending will have to be greatly increased.