If Banks do not provide credit facility, what are the options available for FPOs and impact on producer’s income?
If banks do not provide credit facilities, FPOs can explore alternative options such as microfinance institutions, government subsidies, cooperative credit societies, and peer-to-peer lending. The lack of bank credit may impact producers' income by limiting access to necessary resources and capital for growth and efficiency, potentially reducing productivity and profitability.
If banks do not provide credit, FPOs and producers can explore alternative financing options like NBFCs, MFIs, and SHGs/JLGs. They can also leverage government schemes such as PMKSY and RKVY. However, lack of formal credit can restrict investments in modern technologies, reduce bargaining power, and hinder adoption of risk-mitigating strategies, thereby impacting productivity and income
The small time farmers are not able to access the loans provided to them due to the high rate of interest and also due to lack of education. Banks are not very eager to give loans to the small farmers since they are mostly unable to pay up the loan amounts. This is mainly due to lack of proper infrastructure and instruments to dispense credit to needy farmers. It has also failed to develop a culture of deposit mobilization, lending to worthwhile borrowers and effective loan recovery. If banks do not provide credit to Farmer Producer Organizations (FPOs), there are other options available, including:
· Equity grants
FPOs can receive matching equity grants of up to Rs. 2,000 per farmer member, with a maximum limit of Rs. 15 lakh per FPO.
· Financial assistance
FPOs can receive financial assistance of up to Rs. 18 lakh over a period of three years.
· Infrastructure and marketing support
FPOs can receive support for infrastructure and marketing, including cheaper loans and CGF.
· Training and exposure
FPOs can receive training and exposure for exports from agencies such as APEDA/MPEDA.
· Integration with ONDC
FPOs can integrate their seller platforms with ONDC to market their products in domestic markets.
Suppliers' Credit can be obtained from credit companies or from potential buyers and sellers. The producers who sell their products to the FPO, can sell on credit. FPO can get part payment in advance from prospective buyers. It can get agriculture inputs from the Agro dealers on the conditions of payment after sales. Banks are often reluctant to lend loans to small farmers because there is high risk involved. Also, the bank may not have any assets to collect in case of non-payment of the loan.
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