Factors Affecting Small Farmers' Access to Institutional Credit in Rural Orissa, India


  • Kailas Sarap

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    • Kailas Sarap is a Reader in Economics at Maharishi Dayanand University, E-6, University Campus, Rohtak-124 001, Haryana, India. He is currently writing a book on interlinked agrarian markets in rural India.


This study uses original survey data from six villages to locate and analyse factors inhibiting small farmers' access to formal credit, including credit supply, bargaining strength, bureaucratic formalities, asset-based lending policies, informal tenancy contracts, extended processing procedures and caste barriers. The survey data confirm a correlation between higher overall transaction costs and smaller farm size, and also between arrearages and larger farm size. The analysis leads to the suggestion that policies should be directed both towards reducing the overall transaction costs of formal loans to small farmers, and towards improved collection processes.