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21/01/2021 - Agriculture

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January 21, 2021

Do you think that the technology enabled firms are suitable enough for agricultural lending in the country? Discuss (200 Words)

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IAS Parliament 4 years

KEY POINTS

·        The agriculture space has seen the emergence of a large number of technology-enabled lending firms.

Agricultural credit performs one of three functions:

1)     smoothen uneven and seasonal cash flows

2)    generate new cash flows through returns from investing in assets, acquiring inputs or technology

3)    refinance high-cost debt.

·        Agricultural credit may not really be the most attractive market segment, as its capacity to be an economic multiplier is limited.

·        Small Finance Banks (SFBs) that have been licensed for over two years now have taken limited exposure in farmer finance.

·        On the other hand, credit flow to non-farm rural enterprises offers an immense opportunity.

·        This segment, if funded, has the power to unlock the latent entrepreneurial potential of the new generation young Indians in rural areas, generate jobs, and ignite rural prosperity on a scale greater than the farm sector, and is an area worth exploring by fintechs.

·        Fintechs are best suited in agriculture financing as analytics providers to banks (like the recent tie-up of Skymet with SBI), with the lending happening from banks.

·        It also enable affordable credit to farmers, while at the same time fintechs can explore solutions to deliver credit to the largely untapped rural non-farm enterprises market that will have the ability to absorb much larger quantum of debt and also afford the cost of such credit.

 

 

 

 

Dev 4 years

Please Review and Provide Feedback 

IAS Parliament 4 years

Good attempt. Keep Writing.

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