The Indian agriculture market is estimated to be worth INR 18,367 billion (2019). Currently, India ranks within the world’s five largest producers of over 80% of agricultural items, including many cash crops. Easy availability of credit is a major driver of the Indian agriculture industry. Many farmers and agribusinesses do not have access to timely and suitable credit leading to lower production and productivity. Moreover, a large part of the farming community is trapped in poverty.
Here are 5 ways in which the right credit facilities will empower the agri-community to prosper –
1. Increase in production and productivity
Due to farmers’ financial constraints, they are unable to invest in farm activities. With credit facilities, tie-ups with technology partners and product development partnerships, the agri-ecosystem can implement modern techniques in farming, use high-yielding seeds and implement modern pest control methods and fertilizers. Other activities in the agricultural value chain like storage, manufacturing of inputs and equipment, distribution, and marketing will get a boost too, leading to improvement in quality and quantity of production.
2. Improvement of finances for FPOs
Small farms face constraints like procuring inputs and equipment at reasonable prices, lack of bargaining power, and realising better value for their produce. Small producers can collectively form a Farmer Producer Organisation (FPO). They can utilise scale for better bargaining power and selling power. Agri-finance players provide loans at different stages. They give credit for FPOs’ incubation, expansion of FPOs, and quality improvement and innovation to matured FPOs. This unlocks value for all stakeholders in the agri-community.
3. Promotion of financial inclusion
Financial products and credit processes designed to match the needs of small and marginal farmers will allow them to invest in their farms, improve production, and participate in sales and distribution processes that are favourable to them. Micro-credit of different tenures will help agri-allied labourers and small agricultural processing companies to develop micro-busines activities better. Expanding access to affordable financial products and services for rural populations will lead to their financial inclusion.
4. Engaging youth in agriculture
The fragmented and disorganised nature of activities in the agriculture sector and the seemingly low perception of economic advancement in agriculture keeps the youth away. Innovative credit solutions for agriculture and small businesses will encourage the youth to look at agriculture and related activities in a positive light. With start-up capital, financing for producing and marketing innovative products, and promotion of e-business, they can be encouraged to take up agriculture as a career, and the agri-community will grow.
5. Value chain financing
The agricultural sector has many players in the value chain – producers, agri-input dealers, equipment manufacturers, agri-processing companies, and distributors. Lack of finance to any of these players hurts the agriculture value chain. Agri-finance players who have in-depth knowledge of the business cycle can support them by meeting their financial needs and removing operational obstacles. Timely and accessible financial solutions enable the entire agricultural value chain to be cost-efficient, maximise product value, and become globally competitive.
Expansion of financial access to key stakeholders in the agricultural value chain augments production, enhances productivity, reduces poverty, and triggers a balanced regional development.