The southern belt of Nepal’s Mid and Far Western regions is home to stretches of farmland that tune golden come harvest time, yielding enough to feed the farmers, their families, and leaving plenty to sell. Traditionally, locals have lived liked this for centuries, using the rich Terai land for their sustainable livelihoods. Severely affected by the lack of access to financial products and services, these lifestyles are facing new challenges.
A lack of access to finance for the region’s farmers has far-reaching consequences. Prices of crops are 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 cheap. 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 migrant labour jobs.
Global IME Bank’s Sakchyam Post Harvest Financing product developed in partnership with Gyan Agri (KL Dugar) takes much sought-after access to finance to the farmers of Banke, Bardia, Kalilali, and Kanchanpur. Global IME Bank will make loans available to these farmers against Warehouse Receipts provided by Gyan Agri upon deposit of produce from the farmers. These receipts will provide proof of ownership of commodities stored in a warehouse and which can be used by the farmer as collateral to seek instant access to attractively priced credit of up to 70% of the receipt value. The farmer will pay off the loan when he decides to sell his commodities stored in the warehouse (when the market prices are higher).
Through this new banking relationship established with the farmer, GIBL will provide 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 will be NPR 60,000.
This product launched with DFID Sakchyam assistance will disburse NPR 290 million in loans over the project’s 3-year duration to benefit more than 4,000 farmers. Farmers will not only sell crops at higher prices but also get credit at lower interest rates compared to informal lenders. At least 50% of the beneficiaries of these loans will be from disadvantaged groups, and 40% of beneficiaries will be women. It will also create new jobs – 40% for women, youth and people from disadvantaged groups and encourage locals to stay away from migrant labour jobs. The success of the product should also be replicated in other districts by the government or by other public-private partnerships. For the banks, this provides opportunities to build new relationships with the unbanked/under-banked rural population and develop new products for them.