Connect with us

Hi, what are you looking for?

Articles

5 solutions for financing sustainable agriculture

Sustainable agricultural practices may not be possible without accessible, affordable financing, says RBI Deputy Governor:

Sustainable agricultural practices like organic farming, climate-smart technologies, and modern irrigation systems may seem costly upfront, but they offer long-term benefits by improving productivity, resilience and environmental stewardship. Without accessible and affordable financing options, the much-needed shift to sustainable farming practices will remain a distant dream for many, said Swaminathan J, Deputy Governor, RBI.

Delivering a keynote address at an International Research Conference on ‘Sustainable Financing for Food Security and Farm Income – Opportunities, Challenges, and the Way Forward’ hosted by Pune based College of Agricultural Banking, Swaminathan said many farmers, especially those in rural or underserved regions, struggle with economic, institutional, and social constraints that limit their access. “Therefore, sustainable finance should not only promote environmentally friendly practices, but also ensure that financial resources are available to the farmers who need them most,” he said.

That institutional credit to agriculture reached an all-time high of Rs25.10 trillion during 2023-24, reflected the importance of financing in driving agricultural growth. He also said approximately 74 million active Kisan Credit Cards have emerged as vital tools for providing timely and flexible credit, especially for short-term needs.

Swaminathan pointed out that traditional lending practices have certain limitations in catering to the needs of the agricultural sector. “Agriculture is inherently seasonal, and returns are often delayed or reduced. Innovative financial solutions are necessary – ones that are flexible and tailored to the specific needs of farmers. This coupled with crop insurance products that cover weather-related risks can help mitigate the uncertainties farmers face,” he said.

BLENDED MODELS

He also added that blended finance models – where public funds are used to leverage private investments – can be instrumental in providing the necessary capital for sustainable transitions. This would not only mobilize resources from multiple sources but also distribute the risks and returns more equitably, he said.

Swaminathan advocated 5 solutions which could go a long way in addressing the issue of financing sustainable agriculture:

1. Farmer Producer Organizations, or FPOs, can be a crucial mechanism for addressing the specific challenges faced by small and marginal farmers. As of 31 March 2023, there are over 24,000 Farmer Producer Companies and they are instrumental in scaling up the adoption of sustainable farming technologies developed by research institutions.

2. Value Chain Financing model integrates various stakeholders-farmers, aggregators, traders, processors and financial institutions into a coordinated system that improves efficiency across the agricultural process. There is a need for increased focus on structured agriculture value chains and their financing.

3. Warehouse Financing when agricultural price volatility is a recurring challenge in India, often forcing farmers to sell their produce at lower prices during peak harvest due to immediate financial needs. Warehouse receipt financing allows farmers to store their produce in warehouses, delaying the sale until market prices become favourable.

4. Financing technology adoption in agriculture offers immense potential to boost productivity and sustainability. Expanding irrigation infrastructure, promoting micro-irrigation systems and encouraging farm mechanisation can significantly increase farm income and improve efficiency

5. Capital formation in agriculture through convergence with government schemes, which is driven by the Central Government is a key element. The Rs1 trillion Agri-Infrastructure Fund supports institutional credit in alignment with several government schemes.

TECHNOLOGY USE CRUCIAL

Swaminathan felt that technology and data-driven insights can enhance financing models. “Financial institutions must leverage technology to improve access to credit and mitigate risks. Collaboration with digital platforms that track crop yields, weather patterns, and soil health can provide real-time data that financial institutions can use to assess risk more accurately. These platforms can also help farmers make more informed decisions and boost productivity while reducing their environmental impact,” he said.

RBI has taken several initiatives to facilitate digital public infrastructure and make institutional arrangements apart from policy initiatives aimed at promoting innovation while ensuring safety and stability. “Last year, RBI announced the Public Tech Platform initiative through the RBI Innovation Hub, aiming to provide frictionless credit by enabling the seamless flow of digital information to lenders. This open, plug-and-play digital platform, now renamed Unified Lending Interface, allows financial sector players to connect effortlessly. Recently, NABARD collaborated with RBI Innovation Hub to integrate the e-KCC loan origination system into the platform, significantly reducing the turnaround time for agricultural loans from weeks to minutes,” he pointed out.


[email protected]

Recent Articles:

The Future of Cybersecurity: Balancing AI & Human Expertise

 

 

 

 

Products, Partnerships & Milestones

Don't miss our updates on your email

Subscribe to our Newsletter

PR Newswire

Copyright © Glocal Infomart Pvt Ltd. All rights reserved. Usage of content from website is subject to Terms and Conditions.