Financing small agricultural enterprise Sustaining small agricultural efforts
Context:
Relatively few institutional loans are available to small farms which are therefore forced to rely on informal credit markets where real interest rates are typically 50% or higher. These farms are thus discouraged from using credit to finance technological improvements such as the introduction of high-yielding varieties of seed, inorganic fertilizers or chemical pest and weed controls. They resort to borrowing mainly in emergencies such as crop failure. Small farms generally have less contact than large farms with government seed and fertilizer programmes and extension services and are usually inadequately connected to the main markets.