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Pakistan Dairy Development Company
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| Link to Finance |
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Credit plays an importent role in rural development.
It allows farmers to invest in new technologies which will in turn
lead to increased production. Limited access of rural poor to formal
credit has negative implications on both rural growth and welfare.
At present potential formal suppliers of credit are often reluctant
to offer loan facilities to both small land owners and tenants because
of high transaction costs and perceived high risk.
Informal credit tends to be a short term proposition and hence does not contribute
to rural growth as such funds cannot be funneled into long term productive investment.
The non-availability of formal credit include friends and relatives, commision agents,
shopkeepers, landlords, employers, inputs suppliers and, in the case of dairy sector, middlemen.
The cost of informal credit may be extremely high. In addition, such loan may be “tied” in the sense
that the farmer is obliged to supply the provider of credit with their produce. In the case
of the dairy sector, middlemen supply informal credit to the farmer and whilst not necessarily
paying less than market prices for the milk, an arrangment guaranteeing supply from the farmer
to the creditor is put in place there by exacerbating the problems associated with “loose milk”.
Dairy Pakistan will work alongside formal credit institutions to develop business models under
which finance can be made more avaiable to the dairy sector. Utilizing synergies between other
existing programmes, it is planned to initially leverage off the current credit relationship
that has been developed by a develop a profitable, sustainable relationship between the
rural sector and the fromal credit market.
It is envisaged that this Link to Finance Programme will involve supply of milk to formal
processing sector. Processors or financial institutions which wish to work with PDDC on this
programme should contact:info@pddc.com.pk
As noted above, the cost of informal credit may be very high, hence this programme has the goal
of achieving significant poverty alleviation.
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