March 15, 2024
Introduction
Agriculture has been the backbone of India’s economy. According to a study conducted by the Press Information Bureau, around 60% of Indian households depended on agriculture for livelihood in 2003. Today, this percentage has gone significantly down to 47% and accounts for 15% of the total India’s GDP. Why this change? Agriculture took a big hit because of rapid industrialization in India, forcing many farmers to abandon their fields, gradually pushing them toward poverty and dealing with their losses. Today, most backward or marginal farmers struggle to cultivate despite being interested in farming due to a lack of financial resources.
Microfinance for farmers enables them to cultivate and make a living out of it. These organizations have become critical in advancing the livelihood of these people, especially in rural areas. This blog discusses how microfinance is contributing to the agriculture sector and improving the livelihood of farmers.
Microfinance in Agriculture
Microfinance in agriculture can be classified into 3 main categories :
- Crop loan – loans for purchasing crops, pesticides, farming, etc.
- Term loan for operations – loan for agricultural operations such as water resources.
- Post-harvest loan – loan for storage and trading operations.
Assisting farmers in forming JLGs
One of the common challenges faced by most of the small or marginal farmers in accessing credit from banks is the lack of collateral. Microfinance organizations are supporting these farmers by forming small groups and providing them with loans at lower interest rates. These classified groups are known as Joint Liability Groups (JLGs), created with one major principle, the group is responsible for the loan borrowed by any individual. These groups are effectively addressing the challenges of farmers in various ways by giving them access to financial services.
Providing Crop Insurance
Floods or other environmental disasters are the worst nightmares for the farmers. These incidents can destroy the crops and cause significant losses to the farmers. Microfinance in agriculture provides customized crop insurance policies to farmers based on various seasons around the year. This prevents farmers from going bankrupt and gives them another chance to cultivate their fields.
Investing in Technology
Many microfinance companies have already started investing in technology to simplify the loan processes. Back in the day, the loan process was completely manual which consisted of filling out an application form, checking the economic transactions of the farmers’ family, etc. This procedure has delayed the loan disbursement process. Today, most microfinancing companies are using mobile applications with minimal data processing to allow faster processing of loan applications.
Strengthening Supply Chains
Microfinance organizations can help farmers by improving the agricultural supply chain by financing transportation and storage facilities. Organizations are supporting farmers by giving them access to the latest advancements in the agricultural industry. By allowing farmers to transport, store, and use advanced tools these organizations are ensuring that the produce is reaching the market in good condition by also significantly reducing the post-harvest losses for the farmers. Some of the microfinance organizations are also offering extension services such as expertise on crops by providing insights and advice on crop management, pest control, and harvest techniques, which together lead to better crop outcomes.
All in all, the role of microfinance in agriculture is significant as these organizations are striving to resolve the most significant challenges faced by the companies. And by doing so, enabling a proper livelihood for the farmer’s families. These organizations have also been partnering with other agribusiness companies to reach a wider audience. These initiatives are helping farmers boost the productivity of crops and also are improving their livelihood in the long run.
Chaitanya India continues to make strides in helping farmers across the country, by providing group loans and retail loans without any collateral. The loans provided by our organization have improved the lives of women who do farming for their livelihood, thereby improving the standard of living of their families as well. Our economy dwells on the sweat of the farmers of our country. We, as an organization, continue to put our best efforts to help and make continuous improvements in the lives of these humble and hardworking farmers who are the backbone of our nation’s economy.
