8ural llnanclal MarkeLs

AgrlculLural CredlL
W CredlL plays an lmporLanL role ln producLlon
and consumpLlon
W 1he prlnclpal source of farm credlL conLlnues
Lo be lnformal especlally for small farmers
W 8ural credlL reaches few households only 32
of rural households Lake loan and only 10 of
Lhese are from lnsLlLuLlonal sources
8ural llnanclal MarkeLs
AgrlculLural CredlL
W 8lcher households have beLLer access Lo
sources of credlL
W lnsLlLuLlonal sources of credlL ls consLralned by
complex procedures whereas lnformal sources
are slmpler and more flexlble ofLen requlrlng
no collaLeral
W 8oLh sources of credlL are Lend Lo be shorL
Lerm
lnformal sources of credlL
W A noLlceable preference amongsL users for
nonlnsLlLuLlonal sources
Lasler access
Absence of cumbersome procedures
AvallablllLy as and when requlred
AvallablllLy of credlL for consumpLlon loans
1he posslblllLy of deferred repaymenL of debL ln
case of crop fallure
no collaLeral requlred
lnformal vs lormal
W lormal secLor has hlgh LransacLlons cosLs LhaL
borrowers are forced Lo pay
AppllcaLlon fees
lorm fllllng fees
Loan reglsLraLlon fees
8orrower's Lravellng expenses
CpporLunlLy cosL of Llme spenL ln negoLlaLlon
CosL of enLerLalnlng people who asslsL ln acqulrlng
a loan
lnformal vs lormal
W Such markup cosLs are negllglble ln Lhe
lnformal secLor
W Powever Lhere ls a bellef LhaL moneylenders
ln Lhe lnformal secLor charge very hlgh raLes of
reLurn
W Large componenL of Lhe reLurn conslsLs of less
vlslble mechanlsm llke manlpulaLlon of ouLpuL
purchase hlgh lnpuL supply prlces eLc
lssues ln formal secLor
W 1otqetloq of cteJlt
lverslon of loans away from lnLended beneflclarles
(small farmers) Lhrough proxy loans
W 9toblem of teqolototy pollcles
1he presence of mandaLory LargeLs for agrlculLural
lendlng has greaLly reduced Lhe emphasls on
proflLablllLy
8anks prefer Lo pay penalLy raLher Lhen meeL
lendlng LargeLs
lssues ln formal secLor
W ock of Jeceottollzotloo
Plgh raLes of defaulL appear Lo have creaLed a
cenLrallzaLlon Lendency ln loanlng powers
1hls ls effecLlng Lhe Llmely approval and
speedy dlsbursemenL of loans
MechanlzaLlon
W 1he concepL ls synonymous wlLh LracLorlzaLlon
due Lo Lhe huge lmpacL Lhey have had on
agrlculLure
W 1he process had a laLe sLarL ln aklsLan
because governmenL had a pollcy of
resLrlcLlng mechanlzaLlon based on Lhe
apprehenslon LhaL lL would dlsplace farm
labor
MechanlzaLlon
W ln reLrospecL lL ls now clear LhaL lL was a
mlsgulded concern
W MechanlzaLlon has resulLed ln lncreased farm
lncome manpower producLlvlLy and
employmenL effecL has on Lhe whole been
poslLlve
MechanlzaLlon
W 1he mosL lmporLanL developmenL has been
farm relaLed offfarm employmenL ln
manufacLure Lhe supply and servlclng of
agrlculLural machlnery Lhe supply of oLher
lnpuLs and posL harvesL handllng of lncreased
ouLpuL
W 1here has been an asLronomlcal lncrease ln
Lhe number of LracLors avallable ln Lhe
counLry
MechanlzaLlon
W CosL was anoLher lssue ln purchase of LracLors
by small and medlum farms slnce mosL of Lhe
LracLors avallable have been of large Lypes
W larmers have Laken loans for Lhe purchase
and Lhe Lhey have made proflLable use of Lhe
LracLors by hlrlng ouL excess capaclLy
MechanlzaLlon
W AlLernaLe uses of LracLors lnclude earLh
movlng operaLlons ln consLrucLlon of rural
roads operaLe sLaLlonery Lhreshers cane
crushers and speclallzed equlpmenL
W 1he use of LracLor drawn Lrolley for haulage of
goods from vlllage Lo Lowns and vlce versa has
been Lhe predomlnanL feaLure of uLlllzaLlon of
LracLors owned by small farmers
MechanlzaLlon
Arguments aga|nst mechan|zat|on
W lL dlverLs caplLal and forelgn exchange from
non agrlculLural secLors Lo agrlculLure where
labor lnLenslve alLernaLlves are avallable
W 1he argumenL of lncreased land producLlvlLy
excepL Lhrough mulLlple cropplng has noL
been concluslvely proved
W larm Lechnology has a blg farmer blas and
Lhus accenLuaLes soclal dlsparlLy
MechanlzaLlon
Arguments for Mechan|zat|on
W Lncourages mulLlple cropplng Lhus land savlng
W 8educes dependency upon draughL anlmals
whose number ls noL lncreaslng as fasL as
avallablllLy of waLer MechanlzaLlon wlll free land
from growlng fodder for draughL anlmals
W 1he new package of modern lnpuLs and more
waLer can only aLLaln Lhelr hlghesL poLenLlal yleld
wlLh help of mechanlzaLlon
AgrlculLural lncome 1ax
W ressure from lndusLrlal and buslness
communlLy on Laxlng agrlculLural lncome
W Creen revoluLlon has lncreased Lhe lncome of
large number of agrlculLurallsLs
W LxlsLence of an exempLed class amongsL Lax
payers dlscourages Lax compllance and
provldes sLrong lncenLlves for Lax evaslon
AgrlculLural lncome 1ax
W 1raders and lndusLrlallsLs have purchased
agrlculLural lands Lo whlLen unLaxed black
lncome by showlng lL as agrlculLural lncome
W Many obLaln flcLlLlous leases of lands from
whlch Lhey show enormous amounL of
agrlculLural lncome whlch ln facL ls buslness
lncome
AgrlculLural lncome 1ax
Arguments aga|nst taxat|on
W lnconvenlenL for Lax collecLors and payers as
mosL farmlng ls subslsLence Lype and noL
commerclal no sLandardlzed accounLs of
cosLs and reLurns and Lhus lncome assessmenL
ls dlfflculL
W Conslderable loss of Llme and money slnce
large number of farmers who are scaLLered all
over Lhe counLry many ln remoLe areas
AgrlculLural lncome 1ax
W Slnce Lhe acLual lncome every year depends
on a loL of naLural facLors and changlng
markeL condlLlons Lhus very dlfflculL Lo keep a
Lab on wheLher farmers are above or below
Lax exempLlon llmlLs
AgrlculLural lncome 1ax
Arguments for taxat|on
W lL ls unfalr and llloglcal Lo make a dlsLlncLlon
beLween agrlculLural and non agrlculLural
lncome
W 1he exLenL of Lax evaslon can be reduced slnce a
loL of people who have boLh agrlculLural and non
agrlculLural lncome evade Lax by clalmlng a
greaLer porLlon Lo be from agrlculLure
W lncome below a cerLaln level could be exempLed
from Lax whlch wlll Lake care of a large number of
subslsLenL poor farmers
AgrlculLural lncome 1ax
W ls agrlculLure already over Laxed?
lL ls sub[ecL Lo a large number of hldden and
lndlrecL Laxes
lndlrecL Laxes consLlLuLe 83 of governmenL
revenue and a large parL ls pald by agrlculLural
populaLlon
Pldden Laxes ln Lhe form of low procuremenL
prlces pald by Lhe governmenL exporL duLles
on commodlLles eLc
AgrlculLural lncome 1ax
W Plgher LaxaLlon wlll dlscourage savlngs and
lnvesLmenL aL a Llme when farmers musL make
larger lnvesLmenLs for lncreaslng producLlvlLy
W Plgher LaxaLlon wlll dlscourage farmers from
brlnglng new land under culLlvaLlon whlch has
been a ma[or source of lncreased producLlon
1he WaLer Crlsls
W Cf Lhe LoLal cropped area ln aklsLan 81 or
abouL 1804 mllllon hecLares ls dependanL on
lrrlgaLlon prlmarlly Lhrough canals and Lube
wells
W 1hls shows Lhe lmporLance of a good lrrlgaLlon
sysLem Lo aklsLan's economy and agrlculLure
secLor
W 1he developmenL of waLer resources was a
ma[or focus of publlc lnvesLmenL ln 1960's
1he WaLer Crlsls
W Powever Lhe lrrlgaLlon sysLem has
deLerloraLed ln recenL decades leadlng Lo a
waLer crlsls
W ue Lo poor malnLenance Lhe canal sysLem
has lLs capaclLy of carrylng waLer reduced
W esllLlng of canals has noL Laken place
regularly and crumbllng of canal banks has
also been problemaLlc
1he WaLer Crlsls
W ellvery efflclency from canal heads Lo rooL
zone of crops ls around 33 Lo 40 lmplylng
LhaL ma[orlLy of waLer ls belng losL due Lo
canal seepage splllage breaches and
waLercourse losses
W 1hls noL only effecLs farmers aL Lhe Lall end
buL ls also causlng loss of ferLlle lands
especlally ln Slndh due Lo waLer logglng and
sallnlLy
1he WaLer Crlsls
W aklsLan does noL have adequaLe reservolr
capaclLy ln lLs lrrlgaLlon sysLem Lo sLore waLer
aL peak flows where Lhe counLry's rlvers are
hlghly seasonal wlLh 83 of annual flows ln
summer
W Large lrrlgaLlon sysLem buL wlLhouL a dralnage
sysLem whlch could remove excess waLer and
salL from Lhe soll Lhus more waLer logglng
and sallnlLy
1he WaLer Crlsls
W Large landowners domlnaLe Lhe rural secLor
and are Lhe maln culprlLs who sLeal waLer and
mlsapproprlaLe a share larger Lhen Lhelr
enLlLlemenL
W 1hey brlbe lrrlgaLlon offlcers and use pumps Lo
geL canal waLer 1he Lall end of Lhe lrrlgaLlon
sysLem suffers as a resulL
1he WaLer Crlsls
W Crowlng polluLlon of rlvers and waLer
resources caused as a consequence of
urbanlzaLlon lndlscrlmlnaLe dlscharge of
sewage and munlclpal wasLe
W 1hls has effecLed marlne llfe and made waLer
hazardous for human consumpLlon and
agrlculLure