Rural credit for seasonal cash crops : Indian cane farmers in Fiji

Abstract

The thesis 1S based on a study of 40 randomly selected sugarcane farms in Fiji, and centres on data on farmers' monthly '" receipts and payments over the 1970 seas onal cycle, credit use, and data collected from credit sources. Farm and household expenditures are classified according to their urgency and their probability of recurrence each season. The extent to which these expenditures were fjnanced by credit is set out and analysed, together with details of the monetary cost and other attributes of the credit used. It is shown that costs per dollar borrowed are higher, and other attributes less favourable, the lower the net receipts of the farmer. A model of credit use by farmers with a seasonal cash crop is then derived and used to show that seasonality of receipts puts the low income farmer to an additional disadvantage. The model 1S also used tD calculate the volume of indebtedness which would result in (1) the debt not being repaid at the end of the season; and (2) the monetary cost of the credit absorbing the farmer's cash surplus for the season . Desiderata for credit for each type of expenditure are then suggested, and compared with the cost and attributes of credit available to each class of Indian sugarcane farmer in the sample. Specific recommendations are made whereby the credit problems of the lOH receipts farmer might be reduced. The general conclusion of the thesis 1S that credit problems, where they exist, arise in Fiji more from low levels of farm efficiency than from the characteristics of the credit system, and that any lasting reduction in the credit problems of the inefficient farmer will only come from improvements in f a rm efficiency, and that policy measures airaed at changing the credit system alone will have little, or even a perverse effect.