Discuss the importance of credit in rural development

This paper examines the impact of agricultural credit on agricultural production in Nigeria between 1970 and 2001, by adopting the production-production externality approach. It is revealed, as part of the findings, that agricultural credit is an important factor determining growth of agricultural production and development. But given the short-term nature of credit provision of the banking system, in the face of long gestation period for agricultural production, the paper advocates for a policy reorientation that accords greater attention to policy strategies and resource allocation to agriculture, which has the potentials and capabilities of leading the economy to greater growth heights.

Finance and credit are the two essential requirements for rural development. The rural areas often suffer from low income leading to low rate of savings. Farmers find it very difficult to increase their productivity by investing on their farm lands. Further, the limited number of banks that are available in the rural areas prefer to forward credit to the farmers with large land-holdings. Getting credit from banks being difficult, the small and marginal farmers fall easy prey to the money lenders. The infusion of credit is very essential for the growth of agricultural sector, leading to rural economic development. The importance of credit in rural development is highlighted in the following points: 1. Credit helps the farmers to commercialise their farming. In other words, commercial farming requires funds that are provided via credit. As the small and the marginal farmers produce only for their subsistence, they fail to generate sufficient surplus to reinvest on their lands leading to degradation of the land. 2. Secondly, given the long gestation period between sowing and harvesting of the crops, credit is extended to the farmers for meeting their initial requirements of farm inputs like seeds, fertilisers, etc. 3. Credit saves the farmers from the vicious circle of poverty. The farmers require funds for meeting their general and specific needs. These needs are to be fulfilled via credit. 4. Lastly, agriculture has always been dependent at the vagaries of climate. In the a...

Answer Finance and credit are the two essential requirements for rural development. The rural areas often suffer from low income leading to low rate of savings. Farmers find it very difficult to increase their productivity by investing on their farm lands. Further, the limited number of banks that are available in the rural areas prefer to forward credit to the farmers with large land-holdings. Getting credit from banks being difficult, the small and marginal farmers fall easy prey to the money lenders. The infusion of credit is very essential for the growth of agricultural sector, leading to rural economic development. The importance of credit in rural development is highlighted in the following points: 1. Credit helps the farmers to commercialise their farming. In other words, commercial farming requires funds that are provided via credit. As the small and the marginal farmers produce only for their subsistence, they fail to generate sufficient surplus to reinvest on their lands leading to degradation of the land. 2. Secondly, given the long gestation period between sowing and harvesting of the crops, credit is extended to the farmers for meeting their initial requirements of farm inputs like seeds, fertilisers, etc. 3. Credit saves the farmers from the vicious circle of poverty. The farmers require funds for meeting their general and specific needs. These needs are to be fulfilled via credit. 4. Lastly, agriculture has always been dependent at the vagaries of climate. I...

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What Is Rural Development? Rural development involves improving the quality of life and economic well-being of people living in rural areas, often relatively isolated and sparsely populated. The development of rural areas has traditionally centered on the exploitation of land-intensive natural resources such as agriculture and forestry. Rural areas, however, have changed due to changes in global production networks and urbanization. Resources extraction and agriculture have increasingly been replaced as dominant economic drivers by tourism, niche manufacturers, and recreation. The need for rural communities to view development from a broader perspective has led to a greater focus on a broad range of development goals, rather than merely encouraging agricultural or resource-based businesses. In order to develop rural areas, education, entrepreneurship, physical infrastructure, and social infrastructure are crucial. Rural development is also characterized by its emphasis on locally sourced economic strategies. In contrast to urban areas, which have many similarities, rural areas are highly distinct from each other. Therefore, there are many different rural development approaches around the world. "Rural development" is a very broad concept. Basically, it focuses on actions for the economic development of areas outside the mainstream urban economy. Rural Development In India The development of the rural economy in India is one of the most important factors for the growth of t...

Credit in rural development is important in the following ways: 1. To realise higher productivity in agriculture adequate credit is required by agriculturist. 2. The timely availability of credit helps in enhancing the confidence of the farmer as there is time gap between crop sowing and realisation of income after production. 3. Credit from government agencies helps in relieving the farmers from the burden of local moneylenders and traders. That provides strong base for an efficient growth of agriculture sector. 4. More than two-thirds of India's population depends on agriculture. It is only the credit and marketing facilities that can help them to meet not only their personal expenditures (marriages, ceremonies, other rituals etc.) but also productive expenditures. 5. Credit enables the farmers to have faith in themselves as Indian agriculture, even after fifty nine years of independence, is still dependent on the vagaries of monsoons. Agricultural diversification is essential for sustainable livelihood because: 1. It helps in diversification of crops production which enables the farmers to earn money throughout the year. 2. It facilitates shifting of workers from agriculture to other allied activities like animal husbandary, poultry, fishing, horticulture etc. 3. Diversification helps in reducing the risk of agricuturists and enables them to get various opportunities to get productive sustainable livelihood options. 4. Diversificaiton is essential to provide supplementa...