Agricultural credit, definition, credit need and it's classification II AGECON 211 BSC Agriculture

Agricultural Finance - meaning, scope and significance, credit needs and
its role in Indian agriculture.
Meaning:
Agricultural finance generally means studying, examining and analyzing the financial aspects
pertaining to farm business, which is the core sector of India. The financial aspects include
money matters relating to production of agricultural products and their disposal.
Definition of Agricultural finance:
William G.Murray (1953) defined agricultural finance as ―an economic study of borrowing funds
by farmers, the organization and operation of farm lending agencies and of society‘s interest in
credit for agriculture.‖
Tandon and Dhondyal (1962) defined agricultural finance ―as a branch of agricultural
economics, which deals with and financial resources related to individual farm units.‖
Hopkin et al referred agricultural finance as the means of acquiring and control of assets,
ownership by cash purchase or borrowing or leasing or custom-hiring.
Warren F.Lee et al defined Agricultural Finance as the economic study of the acquisition and use
of capital in agriculture. It deals with the supply of and demand for funds in the agricultural
sector of an economy.
Nature and Scope:
Agricultural finance can be dealt at both micro level and macro level.
Macrofinance deals with different sources of raising funds for agriculture as a whole in the
economy. It is also concerned with the lending procedure, rules, regulations, monitoring and controlling of different agricultural credit institutions. Hence macro-finance is related to
financing of agriculture at aggregate level.
Micro-finance refers to financial management of the individual farm business units. And it is
concerned with the study as to how the individual farmer considers various sources of credit,
quantum of credit to be borrowed from each source and how he allocates the same among the
alternative uses with in the farm. It is also concerned with the future use of funds. Therefore,
macro-finance deals with the aspects relating to total credit needs of the agricultural sector, the
terms and conditions under which the credit is available and the method of use of total credit for
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Compiled & prepared by Dr. M.Umamageswari, Asst. Prof.(Agrl. Economics) JSA College of Agriculture and Technology, Ma.Podaiyur, Cuddalore Dt. – 606108
the development of agriculture, while micro-finance refers to the financial management of
individual farm business.
Agricultural Finance:
i. is not meant merely for more production but also to raise the productivity of farm
resources;
ii. not a mere loan or advance , but it is an instrument to promote the well being of the
farming community;
iii. is not just a science to manage the money, but is an applied science of allocating
scarce resources to derive optimum output; and
iv. is not a mere social obligation on the society; but it is a lever with backward and
forward linkages to the economic development both at the micro and macro level.