3 Innovative Funding Options for Farmers and FPOs
I have been working on farmer financing for several months now. This topic also came up at the recent FICCI meeting on working with FPOs. Many of the attendees mentioned that while a few banks have started engaging on this topic, a lot more needs to be done. We need new and innovative solutions to address capital needs of farmers and FPOs.
In my own experience, banks talk about KCC (Kisan Credit Card), and that is pretty much the end of their offerings, or rather their imagination. Fintechs such as Jai Kisan have definitely got good offerings for farmers. This could be small ticket loans directly to farmers, as they are doing with Gramophone as a channel partner. Or this could be larger loans through Agri input wholesalers/retailers (as they are doing with Syngenta). Samunnati, of course, has been most active in this space.
In addition to the above, there are a few innovative options out there:
1. P2P lending from benevolent lenders seeking low returns - Rang De is doing an interesting job. They invite lenders who accept a low rate of return (6-8%), as the money is going towards improvement of the lives of farmers or rural entrepreneurs. It is heartening to see that there is a segment of the Indian population which is happy to lend for such causes. I hope to see many more projects being funded through such a model.
2. CSR funds for farmers - Grameen Capital has a unique model. They lend to Agricultural projects which have a clear impact element… it could be improvement of farmer income, it could be reduction in emissions, it could be water conservation, and so on. And part of their cost of lending is borne by large organizations who have a CSR agenda and budget. These organizations achieve their CSR goals, and the Agricultural projects get low cost-funds.
3. Leasing of land - While a farm-owner has always had the option of leasing his land to someone else, someone like Growpital has really brought large scale to this simple idea. They work with FPOs and accumulate large pieces of land (typically 20 acre+); the farmer gets assured rental income and Growpital assumes the risk and rewards of production.
The farming community is the most hungry for credit, and at the same time, is the worst-served by the overall financial ecosystem. I look forward to more innovation in this space, to help the farmers.
-Ram (http://www.linkedin.com/in/ramakrishnanm) is working as VP Financial Services at Gramophone, embedding finance in the Agri supply chain. He has been in the Agritech space for 5+ years. He is an Angel investor and also mentors a few start-ups in the Agritech space.}