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How do small farmers arrange capital for farming?

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  • Last Updated : 02 Jul, 2022
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The majority of small farmers borrow money to cover their capital needs. They borrow money from wealthy farmers, dealers, or moneylenders in the hamlet who supply them with various raw materials for land cultivation. These moneylenders assess a hefty interest rate on the amount lent. However, medium-sized and large farmers are able to manage the necessary money with their own farming-related savings.

The medium and large farmers, in contrast to small farmers, have their own savings from farming. They are able to secure the capital as a result.  The amount of surplus is the difference between the farmers’ total crop production and the amount he keeps for personal consumption. A sizable surplus of the crop is produced by medium and big farms. They make money by making and selling these crops. Due to the tiny size of their overall produce and the huge portion that is set aside for family needs.

The following are the village’s non-farm production activities


The shopkeepers in Palampur purchase a variety of commodities from wholesale markets in cities and resell them in the community. In the village, there are a few general stores that sell a variety of goods such rice, wheat, sugar, tea, notebooks, pens, linen, etc. A few families who live close to the bus stop have opened modest stores and sold food in a portion of the area.


A wide range of vehicles connect the adjacent towns and villages. People on the rickshaws, tonga wallahs, jeeps, tractors, trucks, people pulling bullock carts, etc. transportation solutions. They transport both people and cargo between locations. the participants in transportation
have increased during the past few years.


In many families, dairy farming is a common occupation. Grass, Jowar, and Bajra are used to feed cattle. In the next village, milk is sold. It is delivered to the collection facility to be transported to cities later.

Sample Questions

Question 1: Why do small farmers need capital?


They need capital to afford good quality fertilizers and pesticides for better agricultural outcomes.

Question 2:  Why do small farmers arrange capital by borrowings?


This is because they need to raise production for future, earnings are low and they have small fields.

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