Credit Rationing, Risk Mitigation Strategies and Access to Credit to Small and Marginal Farmers: A Study with Reference to PACS in Tamil Nadu

In India, Primary Agricultural Cooperative Credit Societies (PACS) are indispensable institutions for developing the livelihood of small and marginal farmers. Successful PACS proved that they served as a platform to reduce input costs and enhance the bargaining power of farmers, and thereby, ensure better prices. In addition to their role as an aggregator, the PACS served as conduits to handle storage facility, support farm extension activities and provide diversified services. Successful PACS helped small and marginal farmers to cope with agrarian distress. However, there remains a gap between the financial requirements of these small and marginal farmers and the functions of many PACS, which resulted in agrarian distress among large sections of small and marginal farmers in Tamil Nadu. The primary objective of this study is to examine the role of PACS in providing access to credit to small and marginal farmers, while adopting credit rationing and risk mitigation strategies. This study finds that though it is difficult to quantify the impact of risk mitigation strategies adopted by PACS, access to credit has generated employment opportunities and positively impacted the income and assets formation of the small and marginal farmer households. In the current globalised business environment, PACS need to redesign products and services to increase the access to credit to small and marginal farmers.