What is the difference between rural and agricultural finance and discuss the importance of agriculture credit and also discuss its various kinds

There is a small difference between the agricultural finance and rural finance.

1. Agricultural Finance :-
Its link is only with the growth of agriculture. For example the production of cotton, wheat, rice etc.

2. Rural Finance :-
It covers all the aspects of socio economic life of the rural areas. It covers agriculture, animal husbandry, fisheries by forestry as well as development of transport water education and health.

METHODS IMPORTANCE OF AGRICULTURAL FINANCE :-
In the modern age agricultural credit or rural is very important for the agricultural development. While misuse of credit creates more problem instead of increasing the production. The importance of credit can be judged by the following facts :

1. Use of Modern Technology :-
In the most of the developing countries farmer is poor and he can not purchase the tractor, tube-wells, seeds and fertilizers. So the farmers require credit for financing short term and long term development.

2. Purchase of Cattle :-
The farmers borrow money to purchase the buffalo, cow, goats to increase the production of milk and meat. Poultry farms are also established by borrowing the money from various financial institutions.

3. Low Income :-
The marketing conditions of the developing countries are not favorable for the farmers. There is middle man and broker in the way of farmer and consumer. So the farmer can not sell the product at fair price the revenue of the product is low and farmer borrow the money to meet his basic needs.

4. Customs and Tradition :-
Sometimes farmer borrows the money on death, birth occasions to complete the customs and traditions. He spends a lot of money on marriages by borrowing loans. So loan is misused.

5. Natural Climate :-
Natural climate like floods and crop diseases also destroy the financial condition of the farmers. To face the problems Govt. should advance the loans.

6. Suits :-
The farmers spend a lot of money on civil and criminal suits. They can not meet their expenses by their earned income. So they borrow the money.

7. Population Pressure :-
Population pressure is increasing on the land. In India and Pakistan 70% population, depends upon agriculture directly or indirectly. The high birth rate reduces the income of the farmers. So to meet the basic needs of the family, farmer is bound to borrow the money.

8. Repayment of Parents Debt :-
The framers sometimes have to repay the debt taken by their parents from the various sources. So for this repayment farmer borrows the money.

9. Credit for Development :-
Sometimes farmer wants to cultivate the barren land or he wants to improve his economic conditions by starting some development projects. So credit is very useful for using the idle resources.

10. Purchase of Land :-
Farmer also borrows to purchase the additional land from various sources.

KINDS OF CREDIT or CLASSIFICATION OF CREDIT :-
Agriculture credit is classified under these heads :

1. Short Term Credit :-
This type of credit is obtained for a period of one year or less than one year. It is required for the purchase of seeds, fertilizers and other production cost.

2. Medium Term Credit :-
The duration of medium term loans is from one year to five years. The medium term credit is used for the purchase of instruments live stock and improvement of water courses.

3. Long Term Credit :-
This type of credit is required for a period of more than five years. These loans are used for making improvements of land. The tube-wells are installed and additional land is purchased by the farmers with this credit. Sometimes old debts are also repaid.

4. Productive Loan :-
Productive loans are those which increase the productivity and the income of the farmers. For example the credit used on purchase of needs, fertilizer, and tractor is a productive credit.

5. Unproductive Loan :-
These are those loans which do not increase the production and income of the farmer for example the loan consumed on marriage is unproductive.
In the less developed countries most of farmers mainly uses the loan for unproductive purpose.