I Farm capital is obtained by medium and big farmers from their own resources or from banks in the form of loans. Small farmers, on the other hand, borrow from major farmers, village moneylenders, or dealers who provide various agricultural inputs. The interest rate on such loans is generally rather high. Despite this fact, many small farmers cannot afford not to use them.
I believe that information technology can be used by small farmers to increase their productivity and access better prices for their products. This would allow them to reduce their debt and become more independent.
The main constraint for small farmers is lack of awareness about alternative sources of finance. They think only major farmers can help them out but in reality there are many opportunities available for them. If they could just find out about them, I'm sure they would take advantage of them.
Also, small farmers need more markets to sell their products. There are some efforts being made by NGOs to address this issue. For example, they will work with small farmers to develop their products so that they have something to offer both local and foreign consumers.
Finally, small farmers need better tools. They need affordable equipment that can make their work easier and produce more results. Some manufacturers are now coming up with special devices designed for small farms. They include irrigation systems, greenhouses, and livestock shelters.
Small farmers typically borrow money to finance their farming operations. They borrow money from wealthy farmers, local moneylenders, or traders. Then they use the borrowed funds to purchase input materials like seed, fertilizer, and farm equipment.
After making these purchases, they will start harvesting their crops. When the end of the season comes, they will still need to pay back the loan with interest. If they cannot do this, then the lender has the right to take possession of their crops.
Thus, small farmers must be careful not to fall into debt. It is also important for them to save some of their earnings so that they have something left over at the end of the year. This can be used as a deposit with a bank or used as collateral with a trader if needed.
Overall, small farmers need to be aware of their financial situation. If they are going into debt, then they should try to find another way to raise funds. If they have enough savings, then they should consider extending the term of their loans or using the money to invest in new equipment or other forms of insurance.
To arrange financing, most small farmers borrow money from moneylenders or dealers. They make use of their savings.
Small farmers borrow from larger farmers, local moneylenders, or businessmen who offer various agricultural inputs. The interest rate on such loans is quite high, making repayment impossible. Instead, the farmer gives the input company a guarantee that if the crop fails, he will pay back the loan with extra costs.
Larger farmers may have enough capital to invest in more productive land or equipment, so they can grow more crops with the same amount of land or use better quality soil than smaller farmers. In this case they are called "seeders" because they seed new farms with their hybrids or genetically modified organisms (GMOs).
Money lenders in developing countries often work with farmers who want to expand their business. They provide much-needed cash when farmers need it most: during planting and harvesting seasons. These lenders usually charge high rates of interest compared to banks, but since they are not regulated by any government agency they can be less trustworthy.
In industrialized countries, farmers often turn to commercial banks for loans. The interest rates are usually lower than those charged by private money lenders, and there are also government programs that help farmers obtain credit. However many farmers cannot get access to these programs due to strict criteria that prevent them from being able to repay the loans.
Answer: Large and medium-sized farmers keep a portion of their produce and sell the rest on the market. The majority of them even utilize their profits to provide loans to small farmers. They succeed in increasing their revenues by charging high interest rates on these loans.
The most common ways that farmers use their earnings are paying off debt, investing in new equipment, or saving for future expenses. Farmers can also choose to spend their money on entertainment, shopping trips, etc.
In conclusion, farmers must first decide what they want to do with their earnings. Then, they should look into different options so they can find out what works best for them.
Modern agricultural technologies, such as the use of HYV insecticides, pesticides, and so on, need a significant investment, requiring the farmer to spend more money than previously. As a result, they are able to get the required financing. (ii) Small farmers, on the other hand, must borrow money in order to secure capital. However, due to their poor credit history, they can't get any kind of loan from traditional sources such as banks or microfinance institutions.
The reason why small farmers cannot get loans is because they don't have enough collateral. Banks require some sort of security in order to ensure that if the borrower fails to pay back the loan, then the bank will be able to take something from the defaulting farmer. For example, if a farmer owes the bank $10,000 and has a value of only $5,000 worth of crops, then the bank can take all of his/her crops even if they aren't profitable. In this case, the bank would receive $10,000 while the farmer would still owe him/her $10,000 even after producing a good harvest.
However, not all small farmers are equal when it comes to security. Some develop strategies for getting loans while others don't. If a farmer has resources available to invest into his/her farm, such as the use of modern technologies or additional employees, then he/she will be able to get a better deal from the bank.