Farm Households’ Perceptions and Their Willingness to Apply for Formal Agricultural Credit in District Mardan, Pakistan

Abstract

Agriculture is a key sector of Pakistan’s economy, contributing significantly to income, employment, food security, and rural development. Agricultural credit enables farmers to purchase inputs, adopt modern technologies, and improve productivity. However, despite the availability of financing through commercial banks, microfinance institutions, Islamic banks, and Zarai Taraqiati Bank Limited (ZTBL), many farmers face difficulties in accessing formal credit. This study examined farmers’ perceptions of agricultural credit and the factors influencing their willingness to apply for formal agricultural loans in District Mardan, Pakistan. Primary data were collected from 101 farmers selected through multistage random sampling technique. Data were analyzed using descriptive statistics and Binary Logistic Regression. Respondents were on average 47.6 years old, had 7.3 years of education, and owned a farm of 2.16 acres; 85% were landowners. High interest rates, lengthy loan procedures, and religious concerns were identified as major barriers to formal credit access. Regression results showed that education, farm size, income, credit history, and familiarity with banking procedures positively and significantly influenced farmers’ willingness to apply for formal credit, while age and high interest rates had significant negative effects. Farmers with larger farms, higher incomes, and previous borrowing experience were more likely to express willingness to apply for formal credit. High interest rates emerged as the strongest deterrent to credit participation. The study concludes that farmers’ access to formal agricultural credit is constrained by high borrowing costs, limited awareness, and procedural complexities. The study recommends simplifying loan procedures, reducing borrowing costs, expanding financial literacy programs, strengthening rural banking outreach, and promoting Islamic agricultural financing to enhance financial inclusion and agricultural development.