Flow of Credit to Farmers in Maharashtra: Experiences and Lessons

A sample of 50 households (25 households each from Kolhapur and Pune) was chosen over the period 1995-96 - 1999-2000 to basically study the credit experience of farming families depending on landholding size. Relative importance of formal and informal credit agencies in aggregate loans taken by small, marginal and large farmers, purpose of the loans, default rates, prevalence of excess demand for loans, if any have been analysed. One novel idea employed in the paper is that instead of credit rating agencies assessing the loan repayment capability of borrowers, the authors find out the length of relationship between a lender and its borrowers. Thus, small and marginal farmers may be seen to be the most trusted partners of cooperatives.