(a) Explain briefly each of the following types of credits in agricultural production: (i) short term credit (ii) mediunfo term credit (iii) long term credi...

Answer Details

(a)

(i) Short term credit: This is a type of credit given to farmers to finance their immediate agricultural needs. It usually has a repayment period of less than one year and is used to purchase inputs like seeds, fertilizers, and pesticides.

(ii) Medium-term credit: This type of credit is used to finance agricultural activities that have a longer gestation period. It is usually repaid within a period of one to five years and is used for activities such as land development, farm mechanization, and purchase of livestock.

(iii) Long-term credit: This is a type of credit used to finance long-term agricultural projects like the construction of irrigation systems, purchase of farmland, and setting up of processing plants. It has a repayment period of more than five years.

(b)

(i) Four sources of agricultural credit are:

1. Commercial banks: These are the most common sources of agricultural credit. They provide short, medium, and long-term loans to farmers.

2. Agricultural development banks: These banks are specifically set up to provide credit to farmers. They provide long-term loans for agricultural development projects.

3. Microfinance institutions: These institutions provide small loans to farmers who do not have access to formal banking services.

4. Government schemes: The government provides various credit schemes to farmers through its agencies. These schemes include crop loans, farm mechanization loans, and livestock development loans.

(ii) Four reasons why farmers find it difficult to get loans from banks are:

1. Lack of collateral: Banks usually require collateral to provide loans. Many farmers do not have the necessary collateral to obtain loans.

2. Lack of credit history: Farmers who have never borrowed before may not have a credit history, which makes it difficult for banks to assess their creditworthiness.

3. High-interest rates: The interest rates charged by banks on agricultural loans are usually high, which makes it difficult for farmers to repay the loans.

4. Complex application process: The application process for agricultural loans is often complex and time-consuming, which discourages many farmers from applying for loans.