Global IME Bank (Project 1)

SAKCHYAM POST HARVEST FINANCING PRODUCT

Background

The southern belt of Nepal’s mid- and far-western regions is home to stretches of farmland that turn golden come harvest time, yielding enough to feed the farmers, their families, and leaving plenty to sell. However, severely affected by the lack of access to financial products and services while vulnerable to natural disasters like earthquake and floods; their lifestyles are facing new challenges.

Challenges Faced

Lack of access to finance for the region’s farmers has far-reaching consequences. Prices of crops are at their lowest immediately after the harvest season. With high-interest loans taken from informal money lenders, little to zero financial literacy and no proper way to store their crops, farmers are forced to sell their produce for a bargain. Unable to earn tidy profits, such trends have ripple effects – affecting factors like the region’s health and education levels. It has also driven hundreds of farmers to pursue migrant labour jobs.

Sakchyam’s Intervention

With support from UKaid Sakchyam, Global IME Bank Limited’s (GIBL) Sakchyam Post Harvest Financing product was developed in partnership with Gyan Agri (KL Dugar). This partnership takes much sought-after access to finance to the farmers of Banke, Bardia, Kalilali, and Kanchanpur. Global IME Bank made loans available to these farmers against Warehouse Receipts provided by Gyan Agri upon deposit of produce from the farmers. These receipts provided proof of ownership of commodities stored in a warehouse. These were used by the farmer as collateral to seek instant access to attractively priced credit of up to 70% of the receipt value.  The farmer paid the loan when he sold his commodities stored in the warehouse (when the market prices are higher).

Through this new banking relationship established with the farmer, GIBL provided post-harvest financing schemes against pledge of farmers’ agricultural products, loan products for particular cash crops and purchase of agricultural inputs at more attractively priced credit compared to other formal and informal institutions in the area. The average size of the loans was NPR 60,000.

Impact

This product launched with DFID Sakchyam assistance aimed to disburse NPR 290 million in loans over the project’s 3-year duration to benefit more than 4,000 farmers. However, this target was not achieved with Sakchyam recalling the partnership due to the mismanagement with the organisation. At the time of closure, a total of 670 farmers benefitted from the product where 33 farmers received loans amounting to NPR 2,007,100. An assessment of this partnership deemed that the partnership failed as a result of non-performance of the organisation.