Optimizing Agricultural Growth: Targeted Farm Credit Allocation Strategies for Sustainable Crop Yields in Pakistan
Optimizing Agricultural Growth: Targeted Farm Credit Allocation Strategies for Sustainable Crop Yields in Pakistan
Rehmat Ullah, Riaz Ahmed*, Muhammad Tahir, Abdul Majid Nasir and Mushtaq Muhammad
ABSTRACT
This study explores the correlation between the distribution of farm credit and the yields of major crops in Pakistan. The study used multiple regression model for investigating how various forms of farm credit relate to crop yields across different crop categories using district-level data from 2010 to 2020. The study findings reveal that small-scale farm credit emerges as a potent driver that significantly boosted the production of food crops, cash crops, pulses, and oilseeds during the study period. A 10 percent increase in small-scale farm credit resulted in substantial production gains ranging from 1.44 to 5.98 percent across these crops. Medium-scale farm credit also exhibited a positive association, notably enhancing yields of food crops, cash crops, and oilseeds by 2.61, 7.49, and 3.61 percent respectively. However, the study uncovers a relatively weak positive relationship between large-scale farm credit and crop production. These findings suggest that a significant portion of farm credit should be allocated to small and medium farm owners. Also, the current policy of the State Bank of Pakistan—which allocates about 90 percent of agricultural farm credit to small and medium farmland owners—aligns perfectly with the findings of this study. This policy should be maintained with a robust monitoring mechanism to ensure the effective allocation and utilization of funds.
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