A small farmer can borrow from ____.

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Detailed Solution

A small farmer can borrow from Moneylenders, Zamindars, Landlords, Friends, Relatives, or Self Help Groups (SHGs). Banks will not give loans to those farmers who grow crops because it might take a long time for them to repay the loan as they can repay it after the crop harvest, which takes a minimum of three to four months. Small farmers do not have collateral or assets in cash or kind. They have no guarantee of regular income. Hence his repayment capacity will always be questioned by the banks. Suppose they somehow manage to take the loan from the banks, and if they fail to repay it, they have to take loans from the moneylenders at high-interest rates or sell part of their agricultural land, which ultimately leads them into a more debt trap. To avoid these situations, they mainly borrow from other sources.

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