Capital investment: Institutional versus non-institutional credit in farm and non-farm capital formation in southern Karnataka

This micro level study, conducted in the Southern Karnataka specifically focusing on progressive (Tumakuru district) and less progressive (Ramanagara district) areas with an objective of understanding the institutional and non-institutional sources of farm and non-farm capital formation with a total sample size of 240. If the results were looked at irrespective of institutional or non-institutional sources, relatives/friends were the major sources of borrowings in both progressive (39%) and less progressive area (56%) in farm investment because of easy access for immediate requirement. Analysis revealed that the credit delivery to the agriculture farm investment sector continues to be still relatively inadequate. It appears that the banking system (Institutional source) is still hesitant on various grounds to purvey credit to small and rainfed farmer’s farm capital investment. And among the institutional sources, the co-operative credit structure needs revamping to improve efficiency of the credit delivery system in rural areas (in study, needs in less progressive area). Therefore, from the study to reduce dependency of farmers on non- institutional sources of credit in both areas and in particular to less progressive area, the loan procedural formalities (administrative costs) should be made simple and farmers friendly and create awareness among farmers is vital in order to improve the accessibility of credit (mobile banking) for medium and long terms loans for farm capital investments.