Credit choices in agriculture: tracing the shift in farmer loan sources in Bihar (2002-19)

Abstract

This study examines the transformation in credit access among Bihar's farmers over nearly two decades. Using data from the 59th (2002-03) and 77th (2018-19) rounds of the Situation Assessment Survey (SAS) of Farmer Households by NSSO, this paper investigates shifts in borrowing patterns, the role of institutional and non-institutional credit sources, and trends in interest rates across various landholding categories.

The analysis reveals a growing reliance on institutional loans, with significant increases in loan amounts, particularly among medium and large farmers, indicating improved accessibility to formal credit sources. Institutional loan interest rates declined, making borrowing more affordable, driven in part by government initiatives like the Kisan Credit Card. In contrast, non-institutional loans saw slower growth, and their interest rates remained substantially higher, especially for smaller farmers relying on informal sources like moneylenders.

The study highlights a shift in credit preferences towards institutional sources, accompanied by a decline in non-institutional credit reliance. These findings suggest that policy measures have had a positive impact on formal credit access in Bihar's agricultural sector, although challenges remain for small and marginal farmers, particularly in accessing affordable loans. The study underscores the need for further reforms to ensure equitable credit distribution and support for smallholders.