Agriculture plays a crucial role in the 21st century economy of developing countries, and provides the main source of food and inclusive economic growth in India and other developing countries. According to the 2011 census about nearly 60% of India’s labor force is employed in agriculture. The majority (~80% in 2006) of small scale landholdings and farms less than two hectares occupied 40% of India’s agricultural land [1].
Agricultural Finance (AF):
AF
is crucial to support the growth of the agricultural sector. The five important
key research areas presented in the AF:
Understanding demand of smallholder households.
Digital financial services.
Financing for women in the agricultural sector.
Value chain finance.
Agricultural insurance.
The
above five key research areas of emphasis each will examine the innovations and
trends, with the first three looking at the needs and opportunities for small
farmers and women and ways in improve their inclusion into the financial
system.
The
fourth area presents an approach and innovative tools for effective
agricultural lending and market inclusion, and the fifth area focuses on
innovations in using agricultural insurance as a tool to address one of the
most important risks that inhibit agricultural finance, especially for
smallholder households.
Fourteen years ago, Byerlee
and Pal (2006) point outed; the focus of agricultural research in India has widened
and become more complex [3].
The research system now struggles with the need to incorporate following
issues: sustainable management of natural resources, food quality and safety,
household food and nutritional security, and poverty reduction.
Notwithstanding
the rising trend in government funding for Agricultural Research and
Development (R&D), more resources will be needed for growing population.
Agriculture economy in global context
India,
China, and Brazil have become major forces in the global agricultural economy. Therefore,
it is useful to compare Indian agricultural R&D investment trends
with those in these two other emerging economies [4].
China spending almost doubled during the same period. Brazil has one of the
most well established and well-funded research systems in the developing world,
although the spending levels there have been fluctuated over the past two
decades. Rapid growth, particularly in China, has meant that investments by the
three countries combined and accounted for at least half of the developing
world’s total public investment in agricultural R&D in 2000 [5].
Digital Financial Services (DFS): Developments in Serving Smallholder Farmers
The
DFS through mobile channels offers a great promise for improving the lives of
smallholders and their families, significant challenges remain.
(a) Agriculture
credit:
It is relatively of rare drawn from financial institutions. The cost of
assessment of the client risks and transactions costs of providing loans by
conventional means is too high for most financial institutions.
(b) Insurance: It can reduce
the negative impacts of crop failure and livestock illness. It may also improve
a farmer’s ability to access credit and willingness to invest in labor and
inputs. There is a need to better understand the impact of insurance for
product design and how best to target support.
(c) Payments: There is a
fast-growing trend in mobile money transfers.
(d) Regulation
and Protection Considerations: The role of digital innovation in
agriculture and finance is critical and opens many opportunities. DFS for
smallholders have raised many of questions for policy makers and regulators.
Financing assist to Women in the Agricultural Sector
Women
face some unique challenges for get financing support. Their roles in economic
and financial contributions are often invisible. As such, women have lower access to economic
and financial services (World Bank 2015).
Three
main factors are identified, induce the challenges for women in agriculture field. (i) Women
often have limited control and ownership over large assets such as land. (ii)
They also lack the ability to post hard collateral for loans. (iii) The literature points out those women have
limited opportunities to develop human and social capital. These unique
challenges make access to finance a much bigger challenge for women compared to
men in the agricultural sector.
The
new opportunities to offer financial services to female clients to grow their
businesses and purchase additional products for their households, such as
establishing savings accounts, buying insurance products and pension annuities,
among others. In this regard, some of the financial institutions perceive women
as valuable and profitable clients. In this context, it is very important for
most of the agriculture research institutions to fully understand women’s needs
and preferences and to strategically target them.
Closing
financing gap for women requires a call to action by policy makers, the private
sector, and civil society to prioritize, advocate, and devise solutions for
reducing and eventually closing the gender gap in access to finance in the
agricultural sector. Promote women’s legal, economic, political, social and
cultural rights.
Emerging Trends in Financing Agricultural Value Chains (VC):
Some
trends have significant influence on emerging market economies. These are
fundamentally altering the way in which agribusiness cooperates with the
financial sector including: value addition, the emergence of supermarkets, and
agro-industries emerging as a major source of income and livelihood
development.
Our SNB team recommended this research article to help the reader to know about that VC are ever more important to the understanding of agricultural markets. Producers that are left out of value chains run the risk of being marginalized in terms of prices and market integration. In addition to these cash requirements, chain actors closer to primary producers often do not have sufficient own liquidity and need financial backing by the wholesale buyers, processors and chain actors closer to the end consumer. Commitment, governance and standards are essential at all levels; the functioning of the agricultural VC finance system has to be understood by farmers, financial service providers, and policy makers.
References
GoI (Government of India). Agricultural Statistics at a Glance. New Delhi (2011).
S. Fan, A. Gulati, and S. Thorat. “Investment, Subsidies, and Pro-poor Growth in Rural India.” Agricultural Economics, 39, 163 (2008).
S. Pal, and D. Byerlee, The Funding and Organization of Agricultural Research in India, Evolution and Emerging Policy Issues. In Agricultural R&D Policy in The Developing World: Too Little Too Late? (2006).
S. Pal, M. Rahija, and N. Beintema, India Recent Developments In Agricultural Research, Agricultural Science and Technology Indicators (ASTI) initiative (2012).
- N. Beintema, and G. J. Stads. Public agricultural R&D investments and capacities in developing countries: Recent evidence for 2000 and beyond. Background note for the Global Conference on Agricultural Research for Development, Montpellier, France, March 28–31, (2010).
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