Ways to revive rural India
Credit provision in a timely manner at an affordable interest rate is the greatest need of hour to revive rural economy, where poor and unemployed are struggling for their living in great numbers
Credit provision in a timely manner at an affordable interest rate is the greatest need of hour to revive rural economy, where poor and unemployed are struggling for their living in great numbers.
Forget banks for credit, option is NABARD. My present effort is to create awareness of that mechanism which worked with good results and share my personal experience.
National Bank for Agriculture and Rural Development (NABARD): Poor individually cannot get credit from NABARD. But, collectively in aggregate numbers, through a suitable approved channel, loan can be secured from NABARD.
The greatest comfort level is no collateral security, without which banks do not open their mouth even! Their schemes provide the route for acquiring tangible assets that yield regular income as well as provide way to scale up living over a period.
Project implementing agencies (Channel Partners) for NABARD are NGOs, Cooperatives, ProducerOrganisations, private and public limited Companies.
We often read ways in general for reviving economy. But, it does not really help as road path is not clear to implement and move ahead. So, route is shared how we can work out.
NGOs: NGOs are in good number, easily accessible to rural poor, unlike banks. So, we have chosen a NGO which is established for more than three years. Bankable Scheme is prepared for provision of goats through loan from NABARD.
Rural women are the beneficiaries - Women Empowerment. Loan is provided to NGO for purchase of goats. Each woman member is given 10 goats, loan Rs. 60,000.
To create involvement of rural participants, a token margin of 5% is insisted, though Scheme does not require, to convince NABARD. NGO assumes responsibility for recovery of loans and repayment to NABARD. NGO gets incentive too for its services.
Two adjoining village are identified and 500 members could secure loan benefit. This type of project can be replicated for cows, buffaloes, goats, sheep and piggery too. Identifiable assets are to be chosen for the project that yields regular income for repayment.
Once rural empowerment is created, the whole family gets benefitted as women get greater opportunity to make at least some financial decisions.
NABARD programmes believe in a unique approach of tailored loans, with modest grant, where necessary.
Farmers' Produce Organisations: FPO is the excellent route as it is registered under Companies Act, 2013 and NABARD feels comfortable to deal with legal entities. Registration charges would be around Rs. 50,000, not so expensive when the mechanism helps 500 families, to start with.
Proposed Project: Milk is always in great demand as white revolution is still required to meet the needs of increasing population.
Composite loan can be secured from NABARD for purchase of buffaloes/cows to its members and one pick up van with mounted storage and chilling facility for transporting milk to dairy unit.
A tie up agreement for supply of milk gives regular income to its members and also ensures loan repayment.
Small Farmers Business Consortium (SFAC) provides equity grant to FPO to strengthen its capital base. If capital collected from its members is, say, Rs. 5 lakhs, matching grant of Rs. 5 lakhs can be secured which goes a long way in strengthening borrowing powers of FPO. Cap is Rs. 15 lakhs.
Recently, Central Govt. has announced to provide financial support for five years to 10,000 FPOs till they reach sustainable level. NABARD provides 100% grant to NGO both for formation and promotion of FPO, including salary to CEO and incidental expenses for one year.
It is time for NGOs and private limited companies to play a significant role as NABRD is helpful, unlike banks, with a pragmatic approach to listen and help.
Panchayat can play an active role in motivating rural folk to become members of FPO to improve their living conditions.
Now, several NRIs are returning back. Rural educated youth are many. Is it not an excellent opportunity to launch an FPO and be part of rural growth, with employment for himself as CEO?
C. RAMA GOPAL
A Practicing Chartered Accountant, Empanelled consultant to Andhra Pradesh Food Processing Society and Small Farmers Business Consortium (SFAC) who has passion to be part of rural growth, having authored six books on Finance & Management.