Institutional Credit and Agricultural Production: An Empirical Evidence from Pakistan

Abstract

In our prevalent and deprived agrarian sector, sufficient credit provision is a serious problem to implant technological advancements and achieve technical efficiency, moreover to hire efficient inputs to improve and rise agriculture output/income collectively and alleviate poverty eventually. In the middle of embroiled informal credit sector and recent increase in banking services in last decade shrink the attention to intend the formal sector’s optimum potential. In this perspective, this study is going to explore the relationship of agriculture credit on agriculture output. We analyzes the role of institutional credit on agricultural production using the time series data for the period of 1970 to 2008 and to give suggestions and recommendations about the promotion of institutional credit in agriculture sector of Pakistan. Cobb-Douglas production function is estimated using simple OLS, and all the variables are transformed to per cultivated hectare. Results show that agricultural credit, availability of water, cropping intensity and agricultural labor force has significant positive impact on agricultural production. The study recommend that institutional credit should be provided by the concerned organizations in order to boost agricultural output. The credit provision should be made to ensure the contribution of agriculture sector in economic development of the economy.

Keywords: Agricultural Production, Institutional credit, Pakistan