INTRODUCTION

Economic development, as the opposite ofunder-development, implies that a country has ahighly developed economic system. This, in turn,means that it has a highly efficient organizationboth of agriculture and of industry, a highlydeveloped banking and credit system and anadequate development of transport andcommunications. Widespread social, institutionaland organizational changes are implied in theprocess of economic development. It means, inshort, a transformation of predominantly agrarianeconomy into highly industrialized one, bringingabout a rise in national income (N. I) and per capitaincome (P.C.I). This is accompanied by a highrate of capital formation and a high degree oftechnological development.

In an under-developed economy, there is acircular constellation of forces tending to act andreact upon one another in such a way as to keepa poor country in a stationary state of underdevelopment equilibrium. The vicious circle ofunder – developed equilibrium can be brokenonly by a comprehensive government planningof the process of economic development.

In the initial phase, the process of develop-ment in an under – developed country is held upprimarily by the lack of the basic social andeconomic overheads such as schools, technicalcolleges and research institutes, hospitals andrailways, roads and bridges etc. Provisions of

these overheads require very large investments.Such investments will lead to the creation ofexternal economics, which, in turn will provideincentives for the expansion of private enterprisein the field of industry as well as of agriculture.

Finance is the crux of the problem ofdevelopment .The under – developed countrieslike India suffer from scarcity of capital which isthe greatest handicap in their economicdevelopment. No doubt that their savings aremeager but even the meager savings are notavailable for economic development. To mobilizethese savings, a sound banking system isessential and other financial institutions arerequired to canalize these savings intoinvestments and supply the credit needs of tradeand industry. The government is to see thatappropriate financial institutions, are set up tomeet the requirement of the entrepreneurs.

In India, the government took steps to reformthe banking system and put it on a sound footing.Fourteen major commercial banks werenationalized in 1969 and six more commercial bankswere also nationalized in 1980. In the agriculturalsector to meet the short – term credit, landmortgage banks or land development banks havebeen organized. Agricultural RefinanceDevelopment Corporation (ARDC) was set up toserve as a refinancing agency for agriculturalcredit. Several other agencies were alsointroduced for these purposes. These are SmallFarmers Development Agencies (SFDA’S),

© Kamla-Raj 2009 Stud Tribes Tribals 7(2): 143-147 (2009)

Institutional Barriers in Tribal Hill Areas for Agricultural Finance:A Case Study in Nagaland

A.K. Makar1, S. Ghosh2 and C. Nyekha3

Department of Rural Development and Planning, Nagaland University, Medziphema Campus,Medziphema 797106, Nagaland, India

E-mail: ak_ makar@yahoo.co.in

KEYWORDS Jhum cultivation. Village Development Board

ABSTRACT The underdeveloped countries like India suffered from scarcity of capital which is the greatest handicapin their economic development. To mobilize finance, which is the crux of the problem of development, a soundbanking system is essential and other financial institutions are required to channelised savings into investment andsupply the credit needs of trade and industry. Tribal hill areas in North-eastern Region are plagued with someinstitutional barriers on the path of their achieving desired economic growth. The present study is investigating someof the institutional barriers, which appear unique in character and dimension, towards extending agricultural financeto tribal hill people of Nagaland. This study is a helpful for undertaking training, research and consultancy functionsaiming for upliftment of tribal rural masses in North-eastern Region, comprising of seven sisters states (Assam,Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura) and Sikkim.

A.K. MAKAR, S. GHOSH AND C. NYEKHA144

Marginal Farmers and Agricultural Labour(MFAL) schemes etc. In the industrial sector too,financial and other institutions were establishedto promote Industrial development. To assist thesmall scale and cottage industries several boardswere set up such as the Cottage Industries Board,All India Handicrafts Board, State FinancialCorporations, and National Small IndustriesCorporation etc. For large scale industries, severalinstitutions like Industrial Finance Corporationof India (IFCI), Industrial Development Bank ofIndia (IDBI), were established. Industrial Creditand Investment Corporation of India (ICICI) wasalso established to assist the creation, expansionand modernization of industrial enterprises in theprivate sector.

Agriculture is the main occupation of the 80percent people of Nagaland. Agriculture suppliesthe basic food items of this state. But the totalproduction in Nagaland is not sufficient for wholepopulation of the state. Therefore, the primaryrequirement is to increase production by changingthe pattern of cultivation and provide gainfulemployment to the rural masses. In Nagaland,therefore to increase agricultural production bypoor farmers, adequate credit facilities arerequired.

Accordingly the present study was carriedout, taking a case study, for studying the role ofcredit related institutions in the hilly areas ofNagaland.

There exits several studies relating to theinstitutional credit for agricultural advancementlike Minhas and Vaidyanathan (1965),Rajagopalan (1968), Cummings (1971), DharmaNarain (1977), Ray (1984), Pana (1985) etc. Butonly a few studies are available on Nagaland likeHusain (1988), Salah (1989), Lanusosang (1989),Ao (1993), Kumar (1993), Imnayongdang (1993).

Objective of the Study

The objective of the study is to find out thebarriers of credit – related institutions to advancecredit for economic development of Tribal HillAreas of Wokha District in Nagaland.

OBSERVATIONS AND DISCUSSION

Wokha, an erstwhile sub – division ofMokokchung district was upgraded to full fledgeddistrict in the year 1976. The area of this district interms of square Kilometer is 1628. The district is

bounded by Mokokchung and Zunheboto districtin the east, by Golaghat district of Assam on thenorthwest and by Kohima district on the south .Wokha district is broadly divided into five blocks.These are (i) Wokha block (ii) Sainis block (iii)Chukitong block (iv) Bhandari block and (v)Wozhuro Ralan block. Most of the soil of Wokhadistrict comprises (a) forest soils (organic)belonging to the order spodosol (b) alluvial soiland (c) non – laterised and lateritic soils. Thetotal population of Wokha district as per 2001census is 1,61,098. There are 1, 23,402 ruralpopulation. Total literate people are 1, 31,704 outof which literate male is 62,565 and literate femaleis 51,139.

The banking service is rendered to the peopleby the five branches of State Bank of India (SBI),one branch of Nagaland State Co- operative Bank(NSCB), one branch of Bank Of Baroda (BOB),one branch of Nagaland Rural Bank (NRB) andone branch of Farming co-operative society inWokha district. Table 1 is showing the number ofbanks (block wise). In Nagaland, the total numberof branches of banks are 70 including SBI, BOB,NSCB, and NRB where as in Wokha, there are 8branches (in total) of banks.

There are about fifty registered Co-OperativeSocieties in this district. Out of which, 17 societiesare dormant. There are a good number of multi-purpose Co- operative Societies functioning inWokha district, namely, Weaving Co – operativesocieties, Fishery Co- operative Society, PiggeryCo- operative society, poultry Co- operativeSociety etc.

Agriculture is the principal occupation ofabout 95 percent of working population in Wokha.The Jhum is widely practiced in this district. Majorcrops cultivated in the district are paddy andmaize. Many crops like potato, cabbage, ginger,pea, passion fruit etc. are also grown abundantly.Moreover, the soil and climate of the district aresuitable for horticultural activities. In thisconnection, it may be noted that the Departmentof Horticulture has a direct linkage with farmerfor seeds, fertilizers and related subsidies whereapplicable.

The district has many small village industries.There is a Hume Pipe Factory located a fewkilometers away from the Wokha Town. DistrictIndustries Centre (DIC) is running a few citronellafirms – cum – distillation units. There are a fewsaw mill and pine apple fibre unit processingcenter at Baghty.

145INSTITUTIONAL BARRIERS IN TRIBAL HILL AREAS FOR AGRICULTURAL FINANCE

The study shows (which has been known fromfield study) that there are several problems includedin advancing loan. These are discussed below:1. The cultivators are not having proper land

record. Their purchasing and selling of landis done with the presence of Gaon Bura(Village Head man) and Village Council.Therefore, the cultivators can not show anytype of land record to the bank and loan is notgiven to them.

2. Generally, Jhum cultivation is practiced here.Loan is given for Jhum cultivation becauseJhum cultivation is actually shifting cultivationand after few years, they shift their plot ofland for cultivation. So, the land is not fixed.Paddy and maize are cultivated here mainly inthe Jhum land. Therefore, loan is not givenfor the cultivation of paddy or maize.

3. Some amount of loan is given for plantationcrops like pineapple, banana, orange, Passionfruits, ginger, cabbage, pea, potato etc. Thebanks also have financed a large number offishing units. These are mainly pond fisheries.That State Fishery Department maintains adirect linkage with fish farmers and suppliesfingerlings at subsidized rate to the deservingfarmers. This type of loans are given either tothe Self – Help Groups (SHGs) or to theindividuals. For this type of loan, sponsorshipis required either from District RuralDevelopment Agency (DRDA) or from DistrictUrban Development Agency (DUDA). But forindustrial loan, sponsorship is required fromDistrict Industries Centre (DIC).Besides these, loans are also given for

centrally sponsor schemes, which are:(a) Prime Minister Rozgar Yojana (PMRY)(b) Swarna Jayanti Gram Swarozgar Yojana

(SGSY)

(c) Swarna Jayanti Shahari Rozgar Yojana(SJSRY)

(d) Jawahar Gram Samridhi Yojana (JGSY)(e) Self- Employment to Educated Unemployed

Youth (YRS).The Village Development Board (VDB) was

introduced in 1979- 80 by the State Governmentfor the creation of minimum infrastructure andspecial employment programme in everyrecognized village of Nagaland. The grant – in –aid is allotted each year to the VDBs (VillageDevelopment Boards) on the basis of tax payinghouseholds and is the only assured fundallocation given to a village implementingdevelopment programmes of either specificchoices and local needs. VDB is always havingalso fixed deposit in the form of (a) MatchingCash Grant (MCG) and National Saving Certificate(NSC), which helps the VDB to get grant from thegovernment. This is the only programme whichensures that the developmental needs of the rural women is taken care by earmarking 25 percentageof the grant – in – aid for them. This has beenvery successful and has also ensured theeffective participation of the rural people in thein the Rural Development Programme which is inkeeping with the national policy of grass - rootlevel planning . It is well established that a lot ofdevelopment programmes that have resulted inthe creation of durable assets including infrastructures have been made possible mainlythrough this unique programme.

Therefore, there are several schemes foradvancing loans in various developmental fieldsbut our study shows that the loan recovery isvery less. Table 2 shows that 7 percent of thetotal loan has been repaid during 2002-03. Heresponsoring authority only sponsor to give loanto the individuals or to the Self – Help groups

Table 1: List of blocks and their service area banks in wokha district.

S. No. Block Block Code Name of the Bank / Branch

1 Wokha 1 (a) State Bank of India (SBI), Wokha(b) State Bank of India (SBI), Doyang(c) Bank Of Baroda (BOB), Wokha

2 Sainis 2 (a) State Bank of India (SBI),Baghty(b) Nagaland Rural Bank (NRB), Wokha.

3 Chukitong 3 (a) State Bank of India (SBI), Wokha.(b) Bank Of Baroda (BOB), Wokha(C) Nagaland State Co- operative

Bank (NSCB), Wokha.4 Bhandari 4 State Bank of India (SBI), Bhandari.5 Wozhuro Ralan 5 State Bank of India (SBI), Changpang

A.K. MAKAR, S. GHOSH AND C. NYEKHA146

(SHGs) but they do not take any responsibility torecover the loan. Therefore, responsibility comeson the bank only. For this reason also the financialinstitutions do not advance loan always.

4. Another barrier comes from the credit –deposit ratio. In the study area as well in totalNagaland, the credit deposit ratio is very lessbecause of the less recovery of loan. Table – 3shows position of the credit – deposits in thestudy area in details and Table – 4 shows theposition of credit – deposit in Nagaland and otherparts of North East and also in some other tribalareas in India comparing with the credit – deposit ratio in All India level.

Therefore, in total Wokha district credit –deposit ratio is 22 percent where as in totalNagaland, it is only 15 percent because it is verylow (even less than 15 percent) in some otherbackward areas in Nagaland.

Again, in all India level, not only Nagalandbut almost all North-Eastern states, the positionof credit – deposit ratio is very poor because ofless recovery of loan.

Looking at the performance of the financialinstitutions, the following conclusions can bedrawn.1. The financial institutions are not working well

to extend credit facilities for economicdevelopment. This is known from the lowcredit – deposit ratio.

2. The tribal peoples are not getting help fromthe financial institutions to develop

Table 3: Position of Credit – deposit ratio of variousbanks in Wokha district, as on 31.03. 2004.(Rs. in thousand)

Bank / Total Total Credit –Branch deposits advance deposit

ratio (inpercentage)

SBI Group - - -Wokha 140714 22199 16Doyang 27987 1414 05Baghty 7466 5433 73Bhandari 9963 3633 36Changpang 4314 1102 26Total 190444 33781 18BOB Group - - -Wokha 48700 19100 39NSCB Group - - -Wokha 54937 9489 17NRB Group - - -Wokha 5426 4956 91Total 2, 99,507 67,326 22(in the whole district)

Source: Annual Report (SBI), 2004.

Name of the state Credit – Deposit ratio(in percentage)

Nagaland 15Manipur 35Meghalaya 16Mizoram 23Arunachal Pradesh 13Assam 33Tripura 19Sikkim 15Uttaranchal 25Chhasttishgarh 39All India Level 56

Source: Economic Survey of India, 2001-02

Table 4: Position of credit – deposit ratio in North– Eastern region and some other tribal areas inIndia. (as on June 2001)

Bank Agriculture and Industries Services Total Percentageallied activities of recovery

Table 2: Bank – wise position of recovery and over dues as on 31. 03 2004.

D R O D R O D R O D R O

SBI Group Wokha 576 - 576 3552 - 3552 1086 - 1086 5214 - 5214 -Doyang 97 17 80 - - - - - - 97 17 80 18Baghty 950 145 805 540 38 502 531 31 500 2021 214 1807 11Bhandari N.A N.A N.A N.A N.A N.A N.A N.A N.A N.A N.A N.A N.AChangpang N.A N.A N.A N.A N.A N.A N.A N.A N.A N.A N.A N.A N.ATotal 1623 162 1461 4092 38 4054 1617 31 1586 7532 231 7101 03BOB Wokha 2600 215 2385 2105 110 1995 3700 98 3602 8405 423 7982 05NSCB Wokha - - - - - - - - - - - - -NRB Wokha 55 36 19 - - - 920 467 453 975 503 472 52

Grand Total 4278 413 3865 6197 148 6049 6237 596 5641 16712 1157 15555 07

Source: Annual Report (SBI), 2004.D = Demand.R = Recovery.O = Over dues.N.A = Not Available.

147INSTITUTIONAL BARRIERS IN TRIBAL HILL AREAS FOR AGRICULTURAL FINANCE

agricultural pattern as well as industrialproduction.

CONCLUSION AND SUGGESTIONS Therefore, the appropriate measures to be

adopted by various related agencies to overcomethese institutional barriers are the need of thehour; accordingly the following policy prescrip-tions are suggested:a. Since the tribes of Nagaland are not having

land record of Jhum (because of shiftingcultivation), so Jhum cultivation should bereplaced by terrace cultivation and thecultivators will get benefits of credit from thefinancial institutions.

b. The concerned state government (in this caseof Nagaland) should modify land recordlegislation so that the farmers can submitappropriate authentic records to the financialinstitutions to make them eligible for gettingcredit.

c. Land reform measures including ceiling on landholdings to be implemented properly to ensurejustice in the distribution of land so thatfarmers are not gradually evicted from theownership due to financial crisis, which isevidenced from the economic condition of thepoor tribal farmers.

d. The credit policy of the government shouldbe such that the poor section of the societycan get more opportunity of enjoying insti-tutional credit. If it is done, then the benefitswill be directed largely towards the poorhouseholds and in this way the incomeinequality will be reduced. In the hill tribal areasfrom the view-point of communitization andimportance of tribal village council, financialinstitutions like banks may encourage co-operation system of finance as well as Self –Help groups in collaboration with village levelinstitutions (i.e, Village Development Boardsin an case of Nagaland) to overcome thesebarriers.

e. Agricultural marketing system should bestreamlined in the desired direction so thatthe farmers can get the benefits and therebythe repayment aspect, which is more

emphasized by the financial institutions, canbe suitably managed.

NOTES

1 Prof (Dr.) Makar is Reader and Head, Dept. of RuralDevelopment and Planning, Nagaland University,Medziphema Campus, Medziphema 797106,Nagaland, India. He can be reached at ak_ makar@yahoo.co.in

2 Dr. Ghosh is Senior Faculty Associate, ICFAI ResearchCenter, Kolkata. He can be reached at subirghosh1973@yahoo.co.in

3 Dr. Nyekha is associated with Department of RuralDevelopment and Planning, Nagaland University. Hecan be reached at c_nyekha@yahoo.co.in

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