-
Identical processes to be brought together for economy
of scale and standardisation
-
Farmers can come together for only storage and distribution,
through building collective brand equity and negotiating
strength
-
A bigger confederation of small farmers carrying
out different processes leading to an integrated
value-chain of a complete farming activity
-
Geographical confederation of the core agricultural
activities and support activities, for treatment
of a village as a ‘credit group’.
Of
course, there could be a few permutations and combinations of the
above examples, based on varying needs of different agricultural
processes, products and state-wise resources.
Once the above formations are made with the required legal framework,
a radical change in agricultural credit is possible with a further
connecting change in the credit-approach and credit-purpose of agricultural
financiers. These financiers will basically choose from the purposes
and approaches given in the table.
The new, vibrant but ‘secured’ credit delivery system will have
to be evolved quickly. In the present rural structure of ‘credit
rationing’, the so-called ‘village political leaders’ come forward
for credit disbursement and they vanish when credit has to be recovered.
The remedy obviously lies in ‘radical systemic reform’.
If we are talking about true ‘gram panchayats’, we will have to
make the village or ‘gram’ accountable for both, disbursement and
recovery. The whole village should be a ‘consolidated securitisation’
for the banker. Geographically, a village could be one ‘credit centre’
and 5-6 villages together could be a ‘credit group’, fitting into
one of the institutional structures suggested above. Non-government
organisations (NGOs) could well act as ‘credit evaluators, monitors
and goodwill-builders.
Of
course, the NGOs and their activists will have to be educated about
the fundamental aspects of agricultural assessment, credit rating,
loan and equity disbursements, monitoring, rectification and restructuring,
recovery and recycling. A professional, yet humane approach to ‘agricultural
credit management’ can be expected from the NGOs.
The
radical change in agricultural credit would also require a very
efficient and transparent legal system. India has a very comprehensive
legal system with very poor enforcement. Over a period of time,
the complexity in our banking laws has become a major hurdle in
the banking process and has proved to be a blunt weapon in the hands
of those borrowers who do not have a genuine intention to pay back
loans. Many rich farmers have been able to corner a larger share
of ‘loan-related subsidies’, which can be avoided with a few, quick
steps in legal enforcement as follows:
-
Each ‘credit group’ should have a ‘law tribunal’ supported by
an NGO and the local beneficiaries.
-
The entire ‘credit centre’ should be legally responsible for expediting
the payment of loans, so that channelling of national resources
becomes effective
-
All explicit and implicit subsidies to rich farmers must be immediately
withdrawn and legal penalties for rich farmers should be harsh.
-
Allied or non-agricultural assets of borrowers should be brought
under the definition of enforceable securities.
-
Housewives should be educated about the borrowing process and
its legal implications.
-
Application of information technology to the individual farmer’s
performance appraisal, follow-up, documentation, mass training
will have to be done immediately.
To
conclude, a radical change in the small farmer’s credit would
be possible if they, their villages, NGOs and bankers are allowed
and equipped to carry out together a vibrant, realistic ‘Gramodaya
Project’. The author is a management consultant.
