Difference between revisions of "Salam Credit (Afghanistan)"

<div class="item">The salam credit system is an informal credit system in which the repayment of cash advances towards agriculture is made in agricultural produce. This system is prevalent in the south and east of Afghanistan, and generally refers to the advance of cash for agricultural inputs, such as seeds and fertilizer, to be repaid by the debtor in raw opium paste. <br><br>During times of financial stress, a farmer will enter into a contract to provide a certain amount of opium to a creditor, usually just after the harvest (salam credit tends to be a short-term seasonal loan). The loan can be used to finance the cost of agricultural inputs for poppy cultivation, although this is not always the case – it may also be taken to service another debt, such as marriage costs (Mansfield 1999: 12)<ref>Mansfield, D. 1999a. Alternative Development: The Modern Thrust of Supply-Side Policy.  Vienna: United Nations Office on Drugs and Crime</ref>. The amount of the loan is typically 50 per cent of the value of the current price of opium. So for example, a farmer agreeing to provide 10 kilos of opium at a time when opium costs $100 a kilo will receive a $500 loan. The cash value of the loan will vary according to such factors as the proximity of the harvest (the closer to harvest, the higher the farm gate price due to falling stocks) (Anand 2004: 26), and the creditworthiness of the farmer (often opium cultivation in itself gives the farmers access to more favourable credit). Less creditworthy farmers might receive less than the typical 50 per cent, if for example they do not own any land (Mansfield 2004: 4)<ref>Mansfield, D. 2004. The Role of Opium as a Source Of Informal Credit In Rural Afghanistan. World Bank</ref>.