An Analysis Of Institutional Modifications For Effective Farmer Credit In Ceylon

A primary objective of the Agricultural Credit Scheme of 1967 was to accelerate the pace of economic development. Economic development was to be promoted by the credit scheme's expected contribution towards increasing agricultural output and incomes. Agriculture occupies a dominant position in the Ceylon economy, with the rural sector containing over 50 percent of the population. An increase in agricultural output would have an overall effect on per capita incomes and national welfare. The dominance of the agricultural sector makes the interplay between development means and development objective important in that sector. Hence, there appears to be wide scope for raising gross national product through agricultural development. Increasing agricultural production is a problem of investment requiring cash capital for the purchasing of inputs. The importance of purchased inputs in modern agriculture is exemplified by the fact that in Japan, where output per acre is eight times that of India, the expenditures on purchased inputs are ten times as great per acre of land than in India. Credit is a device by which cash capital is provided to farmers. It may be defined as a temporary transfer of purchasing power from an individual or institutions to farmers. Due to the important facilitating role that a credit program can play in a development context, it is important that the credit scheme of 1967 be both technically efficient and effective. The purpose of this study is to identify the factors causing the limited success of the scheme of 1967 and to propose alternative modifications for credit to farmers in Ceylon.