Agricultural Financing - Potential for Innovations ?
Quite often, I come across this from some of my city-based friends, "Someday I would like to retire and get settled in a village and have a farm to myself, grow some vegetables and more ..." I do not know to what extent they are serious about it but I do wonder if they have ever actually thought about the inherent risks that come along with agriculture. How does one combat the costs involved? Agriculture should not only remind one of the amazing green canopy that it can provide, but also the difficulties which come along - ranging from pestilence, unpredictable weather patterns, irrigation and market prices as well. With so muck risk involved, it would be surprising to know how the rural folk have managed these risks.
(Picture of a market in Gujarat. Photo Courtesy: Laila Vaziralli)
Now add to this a certain degree in lack of access to basic financial services - it is not easy to fathom the plight of the farmer. I think I have done enough to push the case for agricultural finance. Agricultural Finance has not been looked upon with much favor by the traditional institutions thanks to the risk factor involved and thus sticking to their core areas. This does not mean they did not do anything. Yes, right from the 60s and 70s, we witnessed a sea of change in the area with the arrival of agricultural banks and more initiatives from the Government of India itself. Though it was a welcome change and an innovative one, one may call them short-sighted as it focused more on credit and not on other products. Actual innovation according to me would mean customizing traditional products to cater to the needs of the local or target population. It would be easy to theorize from where we sit when the ground reality is different.
Providing market linkages, making use of marketing innovations, easing the adoption of technology with an aim to boost productivity, and lastly most critical of all - how to manage these risks; these are the areas that deserve attention when it comes to agricultural financing. Many of these measures have been used in several developing nations where agriculture is a mainstay of the economy. My colleague Abhay Agarwal takes stock of them all and throws some light on the aspects of agricultural financing in the latest addition to the factsheet series. Lets hope that a lot more innovation happens in this field so rural livelihoods are taken to further heights of prosperity ...