The Role of Informal Agricultural Finance in the Development of Local Farming in Khyber Pakhtunkhwa (Pakistan): A Critical Analysis

Abstract

This paper scrupulously discusses the informal sources of agricultural finance, and recommends ways how their intended objectives can be achieved judiciously. Seven dimensions of informal finance are identified by the farmers, particularly of those who belong to rural areas, as reasons for their inclination towards utilizing informal agricultural financing i.e., low interest rates, ease of procedure, low transactional cost, flexible repayment periods, and avoidance of securities, collaterals, and documentation. Three other dimensions are reconnoitered by the money lenders, such as, lenders’ knowledge of local farming requirements, easy accessibility of agricultural credit for local farmers, and their knowledge about farmer’s economic conditions. The article endorses the viability of such sort of financing for the expansion of agriculture, particularly, in rural parts of the Khyber Pakhtunkhwa. The quantitative research technique has been followed for the issue under investigation.