What is necessary to avoid a debt trap in agriculture?
A debt trap can arise when a farmer borrows without assessing interest, repayment period and the ability to pay instalments from farm income. Understanding loan conditions and making a timely repayment plan based on expected crop income helps keep borrowing manageable. Repeated, unplanned borrowing increases the risk of a debt trap. Exam tip: link prevention of a debt trap with financial planning, knowledge of interest rates and proper income-expense records.
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