Bank Of KathmanduSeptember 17, 2015
Bank of Kathmandu’s Sakchyam Sana Kisan Ukhu Karja provides Access to Finance for Sugarcane Farmers in Kanchanpur and Kailali
Background In 2012 alone Nepal produced about 2.93 million tons of sugarcane, grown over more than 64,472 hectares of agricultural land. The total worth of the sugarcane produced has crossed NPR 14 billion. Industry problems such as access to finance however, are discouraging farmers from continuing their traditional sugarcane farming lifestyle.
Challenges Faced Sugar cane farmers take more than a year to grow their produce but get their money an additional 3-5 months after selling their produce to the mill. Unlike other crops, sugarcane needs to be processed immediately after harvesting. With high-interest loans taken from informal money lenders, little to zero financial literacy, and the risk of the sugarcane drying in the fields, farmers are forced to sell their produce for cheap locally or even to mills in India (Sugarcane farmers hit by lack of buyers). They are also increasingly looking for alternatives to sugarcane farming as viable careers.
Sakchyam’s Intervention With Bank of Kathmandu’s innovative Sakchyam Sana Kisan Ukhu Karja product, in partnership with Mahakali Sugar Mill, farmers in Kanchanpur and Kailai can now deposit their sugarcane at Mahakali Sugar Mill and receive an invoice against which they can take loans upto 75% of the value attached to their produce; average loan size is NRP 20,000. Such a loan will allow farmers to take care of financial needs and repay the bank after they get paid by the mill and also collect the remaining value.
Likely Impact Due to Sakchyam’s intervention, the farmers will enjoy better prices for their product, and benefit from lower interest loans from the bank. The success of this intervention will also mean that sugarcane farmers will be able to sell their produce locally, and not have to travel to India to sell there for lower prices. It should also help check internak and outward migration.
The NPR 100 million loans that will be disbursed over the project duration will benefit at least 4000 small holder sugarcane farmers, of which 80% are from the Tharu community, and rest are Madhesis and Dalit women. At least 10% of the total beneficiaries will be women. Banks will also be able to increase services to the underbanked and develop new products for people in these rural communities. Progress in all these factors means possible replication of this product in other districts in Nepal.