Risk management for small farmers in Pakistan: A review

Abstract

Limited progress has been made in the area of risk management for small farmers in Pakistan. Thus, in this review based study, maximum efforts have been made to collect relevant information on the topic from available published sources over last two decades. The local information is supplemented by synthesis of information about regional as well as non-regional countries. In the country, wide gap in agricultural productivity exists between average and progressive farmers that is causing difficulty for small farmers in managing risks. Small farmers are unable to access and compete in high end agricultural markets. Profitability of major crops is quite low and producers’ shares in consumer rupee are also quite low for fruits and vegetables. It affects farmers’ capacity to invest in the sector. While, in the farming business, disbursement of right amount of credit at appropriate time is a key challenge. Similarly, cost of borrowing is inversely related to size of land holding. Thus, small farmers are to rely on informal sector for finances and bear high interest rate on small size loans. Their crop choices depend on productivity and price risks and prudent risk sharing among themselves. Furthermore, their choice to diversify farms also depends on consumption price risk. Illiteracy and inability to read or write make them susceptible to various personnel and human health risks. Crop and livestock insurance schemes, Kissan package, value chain contract financing are the initiatives taken by the public and formal sector banks to support small resource poor farmers. However, there is lack of coordination among agriculture related provincial institutions, provinces as well as with and within federal institutions. Similarly, absence of institutional arrangement and regulatory framework is resulting in vulnerability of livelihood for small farmers as well as undue pressure on natural resources