Almost all the state governments are giving the crop loans to the farmers from 20 years back. But still most of the farmers are facing the problems in farming. So giving crop loans is better option to uplift the farmers income or not.
It is a very good opportunity for the farmers to get the crop loans, but because of the change in the environmental conditions they couldn't get the profit to the utmost and I feel if the farmers prefer the sustainable agriculture practices and agroforestry models, they would definitely doesn't incur any loss and can increase the economic stability of themselves.
That's a good question. I reckon that government ought to be think on not only crop loans but also crop insurance system too. By using a sound crop insurance farmers in safe hand moreover stakeholders like government and private banks also need to provide their contribution on it. Besides government can implement contract farming which provides win-win situation for both parties.
From economic point of view, there are several fundamental problems hampering farmers to escape poverty, particularly in developing countries. Firstly, farmers usually do not own the land. They contribute labor and some capital (for seeds, fertilizer, pesticides etc.), while the owners contribute land. The harvest will then be divided between them. Secondly, farmers have low productivity. Almost everything is done manually. Especially for planting and harvesting, a lot of labor is needed. Thirdly, farmers are the weakest party in the supply chain. They are unable to ask for fair price.
Most of the time crop loans can only help farmers with working capital. When they can secure long-term soft loan for purchasing land, they may have morel control of their lives. Moreover, loan may also be needed in modernizing their production process to increase their productivity.
Very good question . You are right , initially giving crop loans and later waiving off ....what to say...
The problem with that approach is that then later, organizations like local savings groups or larger NGOs will not be able to get normal loans paid back because farmers are all expecting to never have to pay. I agree with Biyyani above. Train them some kind of regenerative agriculture (agroforestry or green manure/cover crops) so they can increase their yields without spending a lot of money to do so. See my article on Researchgate here called "Case Studies in Regenerative Agriculture."
my opinion as someone who is both a student of agriculture and an Agripreneur is, it won't work. if you mean giving out crop loans, then the idea is very good, but to completely waive the loan later on is no good. it will only cause more harm than good. if the idea of never paying the loan is put into the farmers head, they will not work that hard to have a good harvest, and then pay the loan back. then the institution giving the loan ( be it government or bank ) will not like this concept. wealth is being given to the farmers, and the givers of the loan will expect it to come back sooner or later, that's just how the economic machine works. the thought of giving crop loans is definitely good, but the concept of waiving the loan later is not good. many abuse of this system will occur. there will be loss of productivity. moreover, many banks will refuse to give farmers loan, be it crop loans or any other loans, if they see farmers are not repaying the loan back. if one end of the balance is benefiting from your idea, then another end of the balance must be losing. if farmers are benefiting, banks are not, and that's not a good thing.
Farmers need capital to buy day to day inputs like pesticides, fertilizers, etc. and other agricultural implements including unprecedented expenses. This capital should be obtained from institutional sources of credit because they charge a meagre 4% rate of interest effectively. Waiving off the farm loans is a government policy which is meant to woo the farmers and earn their votes. It is not a good step to improve their economic stability. It also disturbs the credit structure and adds to the Non-performing assets of the banks.
It is obviously a good opportunity for farmers to have crop loan in a waiver process which ultimately provide them economic stability.
It is good to give crop loan waiver, but it shall be given based on the farmers' sign of commitment to repay the loan. So that farmers couldn't use that as an opportunity to misappropriate the loan in future.
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