Agricultural finance II SS3 Agricultural Science Lesson Note

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

1. Define agricultural credit
2. State and explain the types of agricultural credit
3. Discuss the problems farmers face from credit sources

AGRICULTURAL CREDIT

Agricultural credit refers to one of several credit vehicles used to finance agricultural transactions such as a loan, note, bill of exchange, or a banker’s acceptance. 

TYPES OF AGRICULTURAL CREDIT

1. Short-term Credit: This is a productive credit which the borrower is expected to refund in a year or less.  It may be used to purchase livestock feed, fertilisers, seeds, fuel, or to pay for hired labour.
2. Medium-term credit: This credit is to be repaid within a period of two to five years. It may be used to purchase machinery, breeding livestock or housing for livestock.
3. Long-term credit: This credit is repayable within a period of three to 20 years. It can be used to purchase costly fixed assets such as land, construction of farm buildings, dams and irrigation projects.

 PROBLEMS FACED BY CREDIT SOURCES BY FARMERS

Commercial Banks

• They are usually biased in favour of large-scale farmers only.
• They demand collateral which farmers cannot provide.
• There is the problem of a relatively high interest rate.

 Community Banks

• The amount of credit is usually small and inadequate to meet the needs of farmers.
• They insist on a would-be lender coming to open an account with them before loans are given.

 Money Lenders

• They are usually biased towards enterprises that bring in quick returns to repay the loan.
• Their interest rates are too high to allow for an appreciable input from the farm business.

 Family Sources

• The use of loans is usually small and inadequate
• They usually insist on short-term credit.

 EVALUATION:   

1. Define agricultural credit
2. State and explain the types of agricultural credit
3. Discuss the problems farmers face from credit sources

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively