The Impact of Formal Agricultural Credit on Farm Productivity and Its Utilization in Khyber Pakhtunkhwa, Pakistan

Agricultural mechanization and the use of mixed inputs ensure higher productivity. In this regard, the Government of Pakistan has executed an approach for the provision of agricultural credit to smallholders for improving agricultural production. However, many issues are involved in the extent, utilization and impacts of credit. This study aims to explore the impact of credit, its utilization, misuse and factors determining the extent of agricultural credit in Pakistan. A semi-structured questionnaire was developed to collect data from 316 farmers in Mardan District. The study was analyzed through statistical tools such as a paired t-test, ANOVA and multiple regressions. Results showed that agricultural credit enhanced crops' production. However, according to percentage use, misuse of the credit was more common than its proper utilization. Farmers utilized credit for land preparation, fertilizers, seeds, pesticides and daily labor. They misused agricultural credit for healthcare, education of children, domestic needs and business. Results of the regression model showed that farmers' age, experience, farm size, farm income, farm labor and land ownership were determinants of the extent of agricultural credit. Policy measures should be taken to stop the misuse of agricultural credit to achieve the target set for agricultural productivity.