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What Is Agricultural Credit?

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  • Written By: Jessica Ellis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 14 September 2016
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Agricultural credit is a financial term that refers to loans and other types of credit extended for agricultural purposes. Many regions have agricultural credit systems that promote the expansion and continued survival of farm and livestock operations. In some cases, agricultural credit can be used by farmers to purchase non-farm items, such as housing and infrastructure.

Providing food is one of the major pursuits of any successful country; a country that cannot feed itself is eternally dependent on external sources which may cost more and may plunge a region further into debt. In recognition of the valuable and critical work done in the agricultural industry, many governments oversee special credit divisions that deal solely with farming and related pursuits. India, Russia, most European nations, Canada, and the United States all have long histories with agricultural credit systems.

Depending on the region, there are several different types of agricultural credit available. Some loans are geared specifically toward new farmers and ranchers that are opening a new farming business and need start-up capital for land, supplies, and wages. Others are meant for established agricultural businesses that are looking to expand on the present level of operations. Some agricultural loans are emergency loans extended after natural disasters to help make fast repairs and restore a farm or ranch to operating conditions. Loans may also be available to young farmers, or those considered socially disadvantaged due to racial or gender prejudice.

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There are necessary requirements that must be met for a credit extension, just as with any loan. Borrowers agree to a repayment length, must make regularly scheduled payments, and usually pay an interest rate on the loan. Since these credit programs exist to help farmers continue to grow and succeed and are usually in the interest of the region, interest rates on agricultural loans may be lower than on loans from private banks. Information and forms for credit applications can usually be found on government agricultural websites.

In the days of an expanding global community, many non-profit and government organizations are attempting to spread the idea of agricultural credit to developing nations. By helping a poor nation improve farming and infrastructure, starvation levels may go down, employment rates may increase, and developing regions may become more self-sufficient. Often, these subsidies and loans come with certain requirements, such as adherence to labor practices and environmental standards. Some non-profits have even set up programs known as micro loans, which allow wealthier donors to loan a specific amount of money to a farmer in a developing nation for a short period of time.

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