Question

who provides capital to the small farmers at high rate of interest

Answer 1

Medium and big farmers retain a part of their produce and sell the surplus in the market. They put this money into their bank account which is received from selling the surplus. Out of their saved money, they provide loans to poor and small farmers. Medium and big farmers also use their savings to arrange the working capital for farming in the next agricultural season. They use this money to buy machinery, cattle, or set up shops. Very high interest is charged on the loans, which they provide to small and poor farmers. They charge high interest rate like 24 % for 4 month. Small and poor farmers also borrow money from village money lenders.
Because of this, the small and poor farmers' situation become worse day by day. They begin an agricultural season with no working capital and end the season with more or less same situation. To begin working on their farms, they take loans at very high interest rates. Due to the small sizes of their plots, their total production is small. Hence they don't have surplus production to sell in the market. They keep most of their production for their own family needs.