with his consent into the system and accesses pre-approved templates from various lending institutions: Axis, IndusInd, HDFC, Samunnati, etc. Much like a LIC agent / independent financial advisor, this digitally trained village level entrepreneur (VLE) enters the Selvam’s details including crop, livestock, background etc. He approaches a digitally trained entrepreneur in his village with his details (crop, land, income, identity, etc). Selvam, a rice farmer with a two-acre farm near Madurai, requires a loan amount ahead of the agricultural season. There is often minimal understanding of this fact by lenders.Īspirational Cash-Flow Lending Story: The Vision for 2025 No products available for personal credit requirementĪ farmer needs money throughout the year for household expenses and hence a part of Agri loans disbursed – especially if processed late and granted post sowing cycle – are often utilised for personal use owing to the seasonal nature of agriculture. This paperwork is time consuming and sometimes incomplete, leading to delay in accessing finance. The farmer often requires NOC / no encumbrance certificate forms from all neighbouring banks for the loan to be processed. Lender does not trust repayment capacity (29%).Why do small and marginal farmers not have access to credit instruments? Often Agri input is provided by the middlemen/distributor on credit which affects the smaller farmer. 70% Agri loans go to the large, profitable farmers at the top of the pyramid however 84% of Indian farmers are medium and small and do not have access to sufficient or timely credit. Lenders are caught in the loop of repeating lending to the same set of borrowers owing to reliable credit history, and ability to repay. Existing credit in the system flows toward large, profitable farmers Access to market prices: options within a 50Km distance.Contract cultivation: closed loop from start to end of the Agri chain, price often pre-determined.Time of sale: price fluctuations based on time of arrival of crop in the market.Access to open markets: exploitation of the farmer by local traders and local loan providers.Quantity and Quality: dependent on weather, input quality, technical advice, water availability.The farmer is never a lone actor but is always affected by the greater issues in the Agri supply chain. The entire Agri value chain, and the success or failure of the farmer is greatly dependent on price and market fluctuations. Agri-chain heavily contingent on price fluctuation and market forces Often farmers have maximum access to cash at the sowing stage of the crop cycle, (which is also the least cash intensive period) but are cash-strapped to finance post-harvest processes (access to mechanisation, cash for labour, warehousing). The farmer requires cash across all stages of the crop cycle but has access to cash only during certain months. Within crop cultivators itself, there is a necessity to further understand that the farmer’s challenges vary based on agro climatic zones and types of crops, rainfed or irrigated farm, amounts of rainfall, soil type, weather, to name a few. The definition and view of a farmer often excludes those involved in poultry farming, pisciculture, animal husbandry, dairy and horticulture. Shortcomings in the Agricultural and Agri Credit Sectorĭespite having the highest percentage of arable land, India is grossly underutilizing its land, water and human resources and has low productivity compared to several countries.
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