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NBFCs refer to entities that are not banks but provide services such as lending and other activities without holding a banking license. One of the main reasons why people choose NBFCs over banks is due to lower costs. Since the need for finance in the farming community is on the rise, banks alone cannot cater to the increasing demand, so NBFCs provide finance to both the public and private sectors.

Entities such as banks consider a strong credit score an advantage while providing a loan and can be stringent regarding the documents’ approval.

Hence, most people turn towards NBFCs for business loans because of less documentation and competitive interest rates.

Let’s further look at the advantages of NBFCs over banks:

• NBFCs provide end-to-end solutions with an easy application process and instant approvals making the loan process faster than banks.
• NBFCs base interest rates are not regulated by the RBI. Therefore, have greater flexibility and offers competitive interest rates.
• NBFCs such as Agriwise provide exceptional customer service and require minimum documentation along with relatively lenient eligibility criteria compared to traditional banks, leading to quick disbursal of funds.

While computing the loan amount over the collateral property during calculation, NBFCs consider statutory changes like stamp duty, etc. Further, loan repayment is easier than banks owing to no penalty clauses.

With offerings that prioritize customers and provide hassle-free and digitized loan processes, the farming community prefers NBFCs over banks.

References:

• https://inc42.com/resources/heres-why-nbfcs-are-better-than-traditional-banks-for-business-loans/
• https://lawyerinc.net/learning/advantages-of-nbfc-over-bank/#:~:text=NBFC%20are%20more%20profitable%20than%20Banks%20because%20of,as%20banks%20have%20stringent%20regulations%20and%20cumbersome%20paperwork
• https://keydifferences.com/difference-between-nbfc-and-bank.html#Definition
• https://www.lendingkart.com/blog/banks-nbfc-which-better-business-loans/
• https://www.moneytap.com/blog/nbfcs-vs-traditional-banks/#Why_NBFCs_are_a_better_choice_for_personal_loans

Agri Equipment Finance is a loan given to obtain business equipment that includes any tangible asset such as: farm equipment (except real estate) that would help borrowers boost farm produce, not having to worry about loan security. It simply refers to a collateralized loan allowing farmers to purchase equipment, and once the loan is repaid, the borrower becomes the owner of that equipment. At Agriwise, we offer these products to our clients who want to purchase small farm equipment for their farms and require financing to do the same.

Features and Benefits of Equipment Finance:

References:

• https://isfae.org/farm-equipment-finance/#:~:text=Farm%20equipment%20financing%20allows%20you%20to%20purchase%20essential,you%20don%E2%80%99t%20have%20to%20worry%20about%20loan%20security.

Agricultural loans are availed by a farmer to fund seasonal agricultural operations or related activities like animal farming, purchase of land or agricultural tools; A form of credit that can be secured as a personal loan by the borrower. Agriwise provides these Agri loans to farmers with commercial or residential properties as collateral and the tenure lasts up to 8 years. It is a Secured term loan with the primary purpose of business development and expansion. However, this loan can also be taken for the purpose of educating a child, marriage or any other personal reasons. The rate of interest on the loan is determined keeping several factors in mind such as loan amount, tenure, credit score, income, existing EMIs etc.

The benefits of this product offering include:

• Financial assistance for Land development & reclamation, Soil conservation measures and on farm development works like Land levelling, terracing, contouring, bundling, fencing etc.
• Term Loans are extended for construction of wells, for deepening/renovating the existing wells and for boring in the existing dug wells to augment water supply.
• Financing for purchase of machinery/implements like Tractors, Power Tillers, seed drill, seed-cum-fertilizer drill, planters, power sprayers, seed cleaners, weed removers, power threshers, chaff cutters, cane crushers, harvester combines etc.
• Term loans for cultivation of Coconut, Coffee, Tea and Rubber plantations, Floriculture, Vegetable and Fruit cultivation etc.
• Credit facilities extended for activities related to dairy, cotton etc.

References:

• https://www.grihashakti.com/knowledge-centre/beginners-guide-to-loan-against-property-lap.aspx
• https://www.landcan.org/Grant-and-Assistance-Programs/

Warehouse Receipt Finance is a process where a financer provides credit to a seller against the security of goods stored in the warehouse. It includes the assurance of the commodity’s quality and quantity within an approved facility. While simple in concept, a warehouse-receipt system requires the availability of safe warehouses and widely accepted commodity grades and standards. Further, it is primarily limited to non-perishable goods with relatively predictable price developments. This product offering by Agriwise has proved to be a boon for several farmers.

Our group company, StarAgri, provides warehouses for our borrowers to store commodities. The warehouse receipts can then be used as collateral to avail loans by the depositors. Warehouse Receipt is an instrument used by the clients like farmers, processors, traders and others to secure short-term finance from NBFCs such as Agriwise. They can now use the warehouse receipt as collateral to avail of credit from Agriwise. The company will provide credit as a loan up to a specific percentage of the value of commodities stored in approved warehouses.

This product offering by Agriwise has several benefits:

• -Borrowers can get short-term working capital loans up to INR 5 crores against the pledge of agri-commodities. All types of food grains, pulses, cereals and oilseeds are covered. The rate of interest is low on such funds.
• -Warehouse receipts allow small farmers to delay the sale of goods, taking advantage of sizeable seasonal price swings for produce while obtaining cash when the harvest begins, which results in higher profitability for the farmers.
• -Another benefit to the small farmers is the transparency of produce prices as we provide them with up-to-date information on prices throughout the season. They can become “price setters” rather than “price takers.”
• -Farmers can realize savings by “buying back” their produce from the warehouse for home consumption during the lean season when food prices are high.

The above benefits make Agriwise’s Warehouse Receipt Finance an attractive option for farmers.

References:

• https://ebrary.net/19416/economics/warehouse_receipts_finance#:~:text=In%20warehouse%20receipt%20finance%2C%20a%20financier%20provides%20credit,an%20independently%20controlled%20warehouse%20to%20secure%20the%20credit

Agriculture is the backbone of the Indian economy and therefore the problems faced by this industry have been crucial topics of discussion. The uncertain nature of this industry results from a number of reasons including:

• Poor infrastructure & farming techniques, low use of farm technologies etc,
  ultimately resulting in low productivity. Consequently, the emergence of digital agriculture- a term used to refer to the use of digital technologies in managing the business of agriculture- is proving to be a boon for farmers today.

Some of these initiatives in India include:

• The initiation of the Digital Agriculture Mission 2021–2025, by the Union Minister of Agriculture & Farmers Welfare, which aims to support and accelerate projects based on new technologies, like AI, block chain, remote sensing and GIS technology and use of drones and robots.
• Sites such as eNam- National Agriculture Market, DBT- Direct Benefit Transfer Central Agri Portal, eChoupal-kiosks located in villages for access to the internet, have been developed to promote the use of technology among farmers.
• AgriStack – a collection of technology-based interventions in agriculture, United Farmer Service Platfrom (UFSP), Esagu and Agrisnet are among some of the other famous platforms based on e-technology.
• Further, the Jio Krishi Platform launched in February 2020 helps digitise the agricultural ecosystem along the entire value chain to empower farmers; The platform uses stand-alone application data to provide advisory, the advanced functions use data from various sources, feed the data into AI/ML algorithms and provide accurate personalised advice.

As a company committed to combine traditional agri knowledge with transparent credit and tech-driven insights to help farmers, with a similar goal of adding value along the entire value chain, Agriwise’s new platform, Fininza (fininza.in/) utilises some of these newer technological advancements. The platform works to smoothen the lending process and provide access to all loan details under one roof.

“Technology can make farmers’ lives easier, predictable and profitable, and increase food production”, said Ram Kaundinya, director general, Federation of Seed Industry of India (FSII). Today, the world is witnessing technological advancements at a rate faster than ever. Big data, Artificial intelligence, Deep learning etc are some of the tools that can be utilise to the advantage of farmers and pave way for economic prosperity in the country as a whole.

References:

• https://www.ibef.org/blogs/digital-agriculture-the-future-of-indian-agriculture
• https://www.analyticsinsight.net/technology-can-benefit-agriculture-farmers-india/
• https://www.insightsonindia.com/agriculture/e-technology-in-the-aid-of-farmers/
• https://economictimes.indiatimes.com/news/economy/agriculture/india-fields-technology-to-boost-farmers-crop-yields/articleshow/85280441.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

The Indian Agri-credit system has made commendable progress with the enforcement of some major policy changes over the years. Credit supply is one of the most integral determinants of investments in agriculture due to the degree of uncontrolled production and price risk that can influence the industry which makes the progress of Agri-credit systems more crucial than ever.

Policy changes have helped strengthen such progress; A number of innovative methods like the Kisan Credit Card Scheme, SHG bank linkage groups, JLGs and FPOs had been promoted for financial inclusion under institutional structure of which all saw great success other than the formerly mentioned KCC.

Further, this problem of farmer’s access to credit is being resolved by the leap from Agritech to Agri-fintech. Even though technology cannot resolve the root issue in its entirety, its implementation is creating a space that facilitates solving issues pertaining to data, digitalisation etc. Data has proven to be a boon which helps NBFCs check the Farmer’s identity, credit records and facilitates the process of determining interest rates and providing the loan. Some of these data points also constitute the foundation layer of Agristack, as proposed by recently released IDEA (Indian Digital Ecosystem for Agriculture) framework by Government of India³. Further, digitalisation has enabled companies to capture crop health, soil health, quality of produce- all of which are important determinants in assessing the creditworthiness for Agri loans and for enabling the process of underwriting among lending institutions.

Similarly, since the late 1990s, organisations have developed innovative approaches to financing agriculture including microfinance concepts, used good banking products drawing on knowledge of agriculture to enter and succeed in this market. No single approach works for all situations but a combination of many of these approaches have shown great promise. Some other innovations in agricultural credit markets include the warehouse receipt financing, value chain financing, leasing, contract farming and producer companies.

At Agriwise, we are more than just a provider of Agri finance. We understand Agri and allied businesses, their challenges and opportunities. We know Agri customers require not just finance, but also knowledge and expertise to grow. Agriwise has adapted to these innovations over the years by strengthening our product offerings which include:

• Agri Term Loans
• Warehouse Received Finance
• Supply Chain/ Invoice Finance
• Equipment and Input Finance
• Working Capital Facility.

We combine traditional Agri knowledge with transparent credit and tech-driven insights to help farmers and Agri & allied businesses to reimagine the future.

A number of Agritechs today have demonstrated that lending to farmers/ FPOs is doable at scale with the integration of smart data intervention, market linkages, partnerships and phygital approach. Agri-credit systems are critical and an effective means for the development of rural India. Consequently, innovations in the agricultural credit market have gained importance over the years. Future innovations and reforms should be designed in a manner that would further help resolve challenges faced in the Agri Finance sector and facilitate the process of lending loans.

References:

• https://inc42.com/resources/pivoting-agritech-to-agri-fintech/
• https://www.econstor.eu/handle/10419/206974
• https://www.researchgate.net/publication/340228278_Innovations_in_Agricultural_Credit_Disbursement_and_Payment_Systems_for_Financial_Inclusion_in_Rural_India

The PM Kusum Yojana was introduced by the central government in 2019. Under this scheme, the central government of India will provide Kusum solar pump sets on a subsidised basis. These solar pumps have two purposes: They help farmers with irrigation and allow them to generate electricity. The government will provide a subsidy of 60% to farmers and 30% of the cost will be given by Government in form of loans. Farmers will only be responsible for 10% of the total cost of the project.

Now, the Rajasthan government launched the Kusum scheme with certain reforms. The Industries Department of Rajasthan said that it would provide subsidies on interest of 30% of cost formerly mentioned- that is the 30% being given in the form of loans. The Rajasthan Renewable Energy Corporation Limited said that the problems being faced by farmers under Kusum Component (which states Addition of 10,000 MW of solar capacity through installation of small solar power plants of capacity up to 2 MW) in the state will be resolved. For this, the Rajasthan Renewable Energy Corporation has started listening to the problems of the farmers.

Under this Kusum Scheme 2022, 17.5 lakh diesel irrigation pumps running in the first phase will be powered by solar energy in order to reduce the consumption of diesel. Irrigation pumps running on solar energy would result in no net loss in the agricultural output. Rajashthan’s Kusum Yojana 2022 will be especially good for those farmers where the state is drought-prone and there exists a problem of electricity. Under the Rajasthan Kusum Yojana, about 10 lakh diesel and petrol powered irrigation motors will be replaced.

Reasons for implementing reforms and promoting the scheme:

• Day time reliable power for irrigation for farmers.
• De-Dieselization by Replacing Diesel Pumps with Solar Pumps, Promoting renewable energy in light of the 2015 Paris Climate Agreement.
• Enhancing Farmers Income under component C: selling surplus energy to DISCOMS at a pre-determined rate.
• Curbing Climate Change
• Boosting Domestic Solar Manufacturing
• Reducing the Import Bill, considering India’s petroleum import bill is large and on the rise. Another incentive to be self-reliant.

Source:

• https://vijaysolution.com/rajasthan-kusum-yojana-2022-online-registration/#:~:text=Under%20this%20Kusum%20Scheme%202022,the%20agriculture%20of%20the%20farmers
• https://mnre.gov.in/img/documents/uploads/file_s-1650960108170.pdf
• https://pmkusum.mnre.gov.in/landing-faq.html