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Sustainable agriculture is essential for ensuring food security, combating climate change, and preserving natural resources.
- However, financing sustainable agriculture remains a challenge as highlighted by RBI in a recently held international conference on Sustainable Financing for Food Security and Farm Income.
Issues with Agro-Financing in India
- Regional imbalances: Share of Southern Region is 47.13% whereas that of Northeast Region is 0.76% (2021-22).
- Issues in access of Credit: ~23% of credit is from non-institutional sources (2021-22).
- Non-integrated value chain financing due to issues such as fragmentation of land holdings
- Other Issues: High cost of finance, lack of collateral, complicated procedures etc.
Solutions Suggested for Sustainable financing
- Increased role of Collectives such as FPOs and FPCs in enhancing bargaining power, access to technology and assured marketing.
- Value Chain Financing by integrating various stakeholders such as farmers, aggregators, traders, processors into a coordinated system.
- Warehouse Financing to stabilize prices of agricultural commodities.
- Adoption of Financing Technology to expand irrigation infrastructure, promote micro-irrigation systems, and farm mechanization.
- Capital formation through convergence with Government Schemes and interest subventions
- Leveraging technology and data-driven insights to enhance financing models. E.g. Collaboration with digital platforms to track crop yields
Steps Taken for financing Agriculture
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