Why do farmers borrow?

Question

Accepted Answer

Farmers borrow because of the long time gap between crop sowing and realisation of income, which creates a strong need for credit. Their borrowings can be classified on the basis of purpose:

1. **Productive borrowings:** Loans to buy seeds, fertilisers and agricultural equipment and implements.

2. **Unproductive borrowings:** Loans for social purposes such as marriage and festive occasions, or to meet expenditure on illness, death, etc.

On the basis of time, credit needs may be short-term (less than 15 months), medium-term (15 months to 5 years) or long-term (more than 5 years).