(a) Briefly explain agricultural finance; (ii) agricultural credit (b) Explain four significance of agricultural finance (c) Mention one problem farmers enc...
Question 1 Report
(a) Briefly explain agricultural finance; (ii) agricultural credit (b) Explain four significance of agricultural finance (c) Mention one problem farmers encounter in obtaining credits from the following credit sources: (i) co banks; (ii) community banks; (iii) money lenders; (iv) family sources
Answer Details
(a) Explanations
(i) Agricultural finance: The branch of agricultural economics that deals with the sourcing, acquisition and management/use of money (capital) for agricultural production and other farm activities.
(ii) Agricultural credit: The loan or borrowed money (or inputs on trust) obtained by a farmer, to be repaid later usually with interest, for use in financing farm operations.
(b) Four significances of agricultural finance
- It provides capital for the purchase of farm inputs such as seeds, fertilizer and machinery.
- It enables expansion of the farm and adoption of improved technology, raising output.
- It helps farmers hire labour and meet running (operating) costs.
- It provides funds for processing, storage and marketing, and cushions the farmer against emergencies.
(c) One problem in obtaining credit from each source
- Commercial banks: demand for collateral security which most farmers cannot provide (also high interest rates).
- Community banks: limited/small funds available so they cannot meet large loan needs.
- Money lenders: very high (exorbitant) interest rates.
- Family sources: the amount available is usually small and unreliable.
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