India, sovaldi pills the second most populated country in the world has more than half of its population living in rural areas. About 60% of the population still relies on agriculture for their livelihoods. Unfortunately, diagnosis agriculture has not been getting the priority that it deserves from successive governments and as a result there is chronic unemployment; and per capita income of the dependents is at the lowest ebb. The final result is abject poverty, low rate of education, low sex ratio and exploitation. Another saddening fact is rural people has very low access to institutionalized credit. Hence the idea of linking agricultural loans to microfinance really holds water.
As RRBs couldn't achieve its original objectives and community owned village banks and co-operatives were starved of funds, a possible way out to rescue the agriculture sector is by linking agricultural loans to microfinance under the strict monitoring of the RBI. Microcredit in the current format may come as a costlier option for the farmers than institutional credit but it is definitely a much better alternative than the usurious money lenders. Moreover, accessibility to credit and value added services are more important to the farmers than rate of interest. Also adequate mechanism should be deployed to ensure that rates of return would cover interest costs. If banks with necessary regulatory support can provide low cost funds to the MFIs, specifically for agricultural lending, then it will be a viable option for all the stakeholders.
Dairy loans and cattle loans are popular among many MFIs in India including ESAF microfinance. But, for the nation to be considered as a strong agricultural oriented economy, the farmers need more than liquid credit. For such a comprehensive overhauling of the rural villages, only MFIs can deliver the goods primarily in the form of improving the literacy levels, contributing to financial literacy and sanitation aspects. Providing loans for buying farm equipments, tractors, building godowns, supporting contract farming and horticulture are options that MFIs shall ponder over. As the penetration of the MFI sector is just over 10% the scope is huge for them to trigger a radical turnaround in the fortunes of farmers in India.
K. Paul Thomas
Founder, Chairman & Managing Director