Academic journal article International Research Journal of Arts and Humanities

Examining the Performance of Rural Financial Institutes under Socio-Economic Influence of Large Landowner: Case Study of Sindh, Pakistan

Academic journal article International Research Journal of Arts and Humanities

Examining the Performance of Rural Financial Institutes under Socio-Economic Influence of Large Landowner: Case Study of Sindh, Pakistan

Article excerpt


This article seeks to evaluate the performance of formal lending institutions in relation to land ownership patterns, the social environment, and political influence over access upon lending facility of formal financial institutions e.g. banks. Besides, this article also provides a comparative analysis of the performance of non-governmental organizations (NGOs) and the banks. At first, general review of land ownership patterns in study area has been made with focus on rationale of land reforms introduced in the country. Lastly, accessibility over lending is linked with land ownership patterns and subsequent influence sociopolitical elite which is proportional to the size of land owned by the farmers. Bigger the land ownership more the sociopolitical influence and access over banks credit facility.

Land Ownership Patterns

Pakistan is a country with productive small-scale farms and a small number of land holding communities. Distribution of landownership has remained skewed with less than one percent of the farmers consisted of more than 25 percent of the total agricultural land available for cultivation. Nevertheless, the absenteeism has contributed little to production but extracted as much as possible from the sharecroppers who cultivate the land (GOP, 2007). On the other hand, about 65 percent of the farmers hold 15 percent of the farmland in holdings of about two hectares or less. Approximately 50 percent of the farmland was cultivated by tenants, including sharecroppers. Additionally, large number of landless rural inhabitants worked as agricultural laborers. Farm laborers and many tenants have remained extremely poor, undernourished and remained in sharp contrast to the wealth, status, and political power of the landed elite (SBP, 2008).

At the time of independence, Pakistan had large scale princely states and they were largely owned by influential landlords. As most of the land was owned by few hands, it was not possible to supervise and cultivate all land for them, therefore, land was given on lease to managers and they were known as land operation operators. According to Bins, Wanger and Fedder (1993) about 50 percent crop land was cultivated by tenants (i.e operational owners). The land was further distributed among share croppers with broadly input and output ratio of some 50:50. The full time land owners and most of the tenants also cultivated through daily wage labors, especially the crops that had long terms crop cycle for example orchard and sugarcane. During the decade of 50s, serious attempt was made to reduce the negative factor of those who don't have land e.g., absenteeism and rent seeking through land reforms. The purpose of these reforms was to provide access over vital resources. It is argued that since the introduction of land reforms in 1950s to date aimed to allot agriculture land to landless peasants (i.e., equitable access by majority of poor peasant is debated and criticized since the inception of the philosophy of land reform of 50s). Table 1 shows that 81 percent of the farmers own less than 5acres amount to 39 percent of the total area owned. 12 percent farmers having medium size land holding (5 to 10) percent occupy only 21 percent of total area. Whereas, remaining 7 percent of the farmers who have the land holding between 10 acres to sixty acres control / own 40 percent of the area.

Credit is an important instrument in enabling farmers to acquire command over the use of working capital, fixed capital and consumption goods. In the wake of the Green Revolution, credit requirements have increased for both inputs for crop production and farm investment. The small farmers, with a limited ability to finance investment, are the logical target group for loans advanced by the credit institutions. In view of the large credit requirements for lumpy investments, large farmers also need to be serviced by the credit system. Due to the important and increasing role of the non-farm sector as a source of employment in rural areas, the need to cater to credit requirements of this sub-sector has also been a motive factor for the reorientation of the rural credit system in Pakistan. …

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