Crop loan
Topic: Rural Credit, Microfinance and Financial Inclusion · NCERT: Class 10, Ch 3 "Money and Credit"
Meaning
A crop loan is a short-term loan a farmer takes at the start of a crop season. It pays for inputs such as seeds, fertilisers, pesticides, water and electricity. The farmer repays it after harvest, out of the money from selling the crop. Repayment "is crucially dependent on the income from farming". This means a single crop failure can leave the farmer unable to repay, and the loan can turn into a debt trap (a cycle of taking new loans to repay old ones).
Example
Swapna grows groundnut on 3 acres. She borrows from a moneylender to meet her cultivation costs. Pests destroy the crop midway through the season, so she cannot repay. Her debt keeps growing, and she finally sells part of her land to clear it (Class 10, Money and Credit).
Don't confuse with
- Term loan (investment credit): a long-term loan for lasting assets such as tubewells, machinery or storage, repaid over many years. A crop loan covers the costs of one season only.
- Consumption loan: taken for needs such as a marriage, a death in the family or a religious ceremony. It produces no income that can be used to repay it.