Timely and adequate availability of finance is a prerequisite for the growth of any sector and agriculture is no exception.
However, the challenges in accessing finance have hampered the growth of this sector specifically. The existing financial infrastructure in India has not been able to meet the key financial needs that arise along agricultural value chains. Many agri intermediaries, as well as farmers, are either left un-served or underserved due to the lack of timely access to institutional finance via agriloans. The market demand for smallholder agriculture finance is huge and is largely unmet. Without access to credit, most smallholders are restricted to farming, trading, processing practices that result in low levels of productivity. Although various financial institutions have come up and have set up shops in rural India, the majority of agri stakeholders still have limited or no access to them.
For the inclusive development of the agriculture sector, financing is an important element. It can play a critical role in plugging the gaps in agriculture and ancillary sectors by providing end-to-end solutions like credit and service to various participants in the agri value chain ranging from farmers, aggregators, traders, processors, importers, and exporters. Agri financing has an important role to play in supporting both on and off-farm agricultural activities and businesses including: input provision; production and distribution; wholesale; processing and marketing.
The farm sector is fraught with inherent challenges which make it unattractive for formal financial institutions. Farming is a cyclical business which follows cropping seasons and the farmers are always exposed to the vagaries of nature which are beyond their control like droughts, floods or diseases. Though the land is the most preferred form of the collateral asset often problems like the title and property rights and smaller loan amounts makes the liquidation process of land, an extremely expensive and arduous task. Liquidation of other movable assets like livestock and equipment is also fraught with risk as usually; it is without proof of ownership and insurance cover.
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