Agriculture Value Chain Finance: A perfect model of agriculture finance

Govt is providing a lot of finance to rural and agriculture sector in India but leakage is a major issue. Finance doesn’t reach where it must reach.  Untimely farmers come under pressure of debt.  That leads to suicide, farmers agitation, damage to public property, Increase in a bad loan, loss of business. Govt finance to farmers and farmers starts cultivation and he gets good return/production but at the end of cropping season, he doesn’t find the buyer. All his challenging work, investment, uses of resources goes to waste. The problem of farmers and agriculture reaches at the same point. In other case govt finance to agriculture industries but they don’t get good quality of raw and material and channel to sell their produce. Finance goes to waste.  Due to the shortage of agriculture produce inflation keeps rising. 

In case of onion in MP (India) during last year. Farmers were throwing onions, started agitation and forced govt to purchase. Govt purchased it at Rs 6/Kg. without proper storage, all the material decomposed, and onion went into waste.  A lot of public money was wasted in this entire process. Ultimately it led to the shortfall in supply. After two months same prices of onions reached at peak prices and customers were buying the onion at Rs 50/Kg. Stockist enjoyed this opportunity.

Govt and financial institutes must come with policy or product where it finances the entire agriculture value chain. First of all govt should identify the value chain and then invites it's all stakeholders if they are agreed then finance should be given to the entire agriculture value chain. At the end of the day, profit will go to pockets of all stack holder. If farmers sell tomato at 2 Rs and retailer sell the material at 40 Rs then after deduction of value addition expenses at every point, the profit should be calculated. This profit should be dispersed among all stack holders of entire agriculture value chain. Govt can also give incentive to stack holders involved in the value chain.

Agriculture Value Chain Finance

This system will give the guarantee to production that it will reach to end consumer. If production will reach to the consumer then the complete chain will not fail. There can be some point of bottleneck. There will be proper arrangement of backup. It will create regular employment. This will create rural and agriculture employment. 50% Indian population is engaged in agriculture sector this 50 % population is largest consumer base of agriculture produce.  This system will empower producer and at another side, it will also give purchasing power to the largest consumer base.