Factors Determining Farmers’ Access to and Sources of Credit: Evidence from the Rain-Fed Zone of Pakistan

This study investigates the factors that affect farmers’ access to agricultural credit and its role in adopting improved agricultural technologies in the rain-fed zone of Khyber Pakhtunkhwa (KP), Pakistan. Using logistic models, we assess and compare the relative role of farmers’ socioeconomic attributes in their access to credit and adoption strategies. The results indicate a moderate positive association between farmers’ access to agricultural credit and their adoption of improved agricultural technologies. The binary logit model’s results indicate that farmers with a large-sized farm, high farm income, better access to information, and large physical asset ownership showed a positive influence on credit access. However, farming experience showed a negative effect on farmers’ access to agricultural credit. Regarding farmers’ credit sources, this study found that asset-rich farmers with more farming experience and better access to information relied more on banks than on input providers and informal credit sources. Similarly, older farmers with more education, larger farm sizes and high farm income were more likely to have borrowed from input providers than banks. We conclude that the role of the effective provision of information on credit and agricultural technology is imperative and requires separate policies that are specifically aimed at different groups of farmers with different socioeconomic and farm-related characteristics.