Abstract: The agricultural economy of Pakistan grew at a rate of 4.5 percent annually during the last one decade. There were various factors responsible for this low growth rate including agricultural credit. It is imperative that credit and services should be provided to poor farmers so that they can emerge out of their poverty trap through financially viable and productive activities. This paper used econometric model to evaluate the effectiveness of credit disbursement in income generation activities of poor farmers. For the purpose of collecting information from farmers, three villages of tehsil Samundri, district Faisalabad were randomly selected. From each village then twenty respondents were selected randomly, making the total sample of sixty households. The estimated equation showed that there was a positive and significant relationship between the amount of credit and the total income. It was also observed that the major constraints faced by farmers in getting agriculture credit were lack of guidance, difficulty in the preparation of passbook by the revenue department, high interest rate and bribery.