Arima North Secondary

Agricultural Science Handout

Term: 1 Year: 2020 – 2021 Class: 4:2/5:2

28th September, 2020

(Continuation from the factors of production)
Acquiring capital for a farm business. Where can a farmer access capital?
Sources of capital to the farmer are as follows:
1. BANKS / FINANCIAL INSTITUTIONS

COMMERCIAL BANK CREDIT UNIONS

Lends money at high interest Lends money at a low interest rate.
rates and shorter repayment However, the amount burrowed
time. depends on the paid up shares.

AGRICULTURAL DEVELOPMENT BANK (ADB)

Provides loans at low interest rates and
longer repayment time. Also offers advice to
farmers.

2. COOPERATIVES
A cooperative is a business owned and controlled by people of the same industry who use it
and have an equal say in its operations. In a cooperative farmers pool their resources with
other members in the co-operative. A cooperative have better representation in seeing after
their day-to-day affairs because they have a greater number of persons. Members in a co-
operation invest money, plan together, save, lend money and educate other members.
TYPES OF COOPERATIVES

RETAIL/PURCHASING COOPERATIVES MARKETING COOPERATIVE

Seeks to improve their efficiencies Market the products and services of

and market competitiveness by “bulk its members e.g. Cocoa + Coffee
buying” a broad range of goods and Marketing Co-operative Society Ltd.
services. Locally, regionally and internationally.

PRODUCER COOPERATIVES PROCESSING COOPERATIVES

Refers to groups of people engaged in Provide processing, packaging and
agriculture. They may buy farm inputs cold storage alternatives for its
equipment, insurance, loans etc. as a members. E.g. NAMDEVCO
group for better prices. Farmers join
hands to face competition and
increase production.

ROLE AND FUNCTIONS OF COOPERATIVES

1. Bargain for better prices.
2. Provides services based on the needs of the farmers.
3. Find potential buyers and markets locally, regionally and internationally.
4. Assist the farmer in producing better quality produce to suit the market.
 3. GOVERNMENT INCENTIVES

SUBSIDY TAX EXEMPTION

Grants, Tax break, Trade barriers, Bona fide farmers are permitted to
Discount on agricultural supplies and import agricultural equipment or
equipment. E.g. Security system 50% inputs and have part or all the taxes
max 30,000. 4 x 4 Pick-up 20% max waived. Tax exemption are given for
40,000. some agricultural inputs.

GUARANTEED PRICE

It is the minimum price for a produce

established by a government and
supported by payments to producers
in the event that the market fall
below the specific minimum. E.g. Rice
selling at a guaranteed price of $2.99.

4. OTHER SOURCES OF CAPITAL

Family/Friends, Money Lender, Sou Sou

CRITERIA FOR OBTAINING CAPITAL/LOAN

COLLATERAL FARM / PROJECT PROPOSAL

Assets on hold or mortgaged The purpose of the loan. It
Registered
to ensure a loan is acquired. must be economically viable.
as a farmer.
E.g. Land, livestock, Comprehensive plan of the
machinery, grain in storage, business venture.
house or building etc.

CREDIT WORTHINESS FARM RECORD / FINANCIAL DOCUMENTATION

Farmers can repay the loan. Accurate records are important to show the
His expenses must not farmer’s management ability and repayment
exceed his income. capacity.

CHALLENGES IN OBTAINING A LOAN

1. Lack of security or collateral to secure loan.
2. Proper records were not kept.
3. Limited land space available. Land cost is high, hence higher repayment premiums.
4. Bankers are reluctant to give loans with some investments since insurance are not available
and risks involved in agricultural production is high.

Assignment
Student Name: _____________________________________ Class: ________

1. A crop farmer wishes to plant sweet pepper. She needs to secure capital to do this.
a) State two economic factors of production other than capital that is important to her
business.
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(2 marks)
b) State the types of capital and give two examples of each type.
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(9 marks)
c) Give two other sources of capital that can be utilized outside of an institution.
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(2 marks)
2. The price of wheat had led to an increase in the price of flour in Trinidad. The Ministry has
decided to substitute a percent with cassava flour. Give three incentives that the Ministry could
provide to encourage farmers to expand cassava production.
3. a) Describe TWO features of an agricultural cooperative.
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(4 marks)
b) Shirley is unemployed and wants to start a fish farming business even though she has no
experience. She has no land on which to set up her farm. She has not determined the size of
her farm or the cost of her inputs. She was advised to visit ADB for a loan.
Advise Shirley of three challenges that she may encounter in trying to obtain a loan and why.
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(6 marks)