Landless Farmers Need Cash in Hand to Continue their Production
Landless farmers are most of the time excluded from financial institution while they need cash in hand to continue their production activities. All they need is flexible financing: long term loan with low interest.
Financial Challenges for Landless Farmers
Finance in one of the most important elements that is needed by the small producers groups, as well as by registered cooperatives. Small producer groups are basically poor farmers and in most instances, they produce agricultural products by the taking land on lease from the rich landowners or they are involved with sharecropping. The groups do not have enough cash in hand to invest in the production activities. As such, they need financial support from external sources. However, small holders are unable to access formal financial institutions, who often seek collateral for financing. As a result, smallholders are excluded from institutional financing as they do not have assets to give as collateral. In most cases, they depend on local money lenders to meet their emergency financial needs. There is also lack of financial literacy among the small producers and their representative entities in these remote areas
Organization and Advocacy
Laili Begum (45) is a member and President of Daxin Somos Kuthipara vegetables producer organization in Shreepur union (village) of Gaibandha district. She is also an executive member of the Shreepur union federation, which was formed in August 2017. This federation has an executive committee consisting of 12 member with representatives from producer groups covering different value chains. Shreepur federation has 28 producer organizations. They regularly organize meetings in their federation.
As part of the Civic Engagement Alliance (CEA) program, they organized a workshop with their federation and identified advocacy issues, along with strategies to implement their lobby agenda. They have identified systemic constraints faced by the small producers, including limited or no access to flexible finance suitable for their respective value chains. Micro-credit is available from microfinance institutions operating in the area. The problem is, however, that these microfinance loans have high interest rate and installments start from the first week of receiving credit. The producers need long-term finance with low interest rates. To solve this problem, they discussed the issue in their meeting and developed a detailed plan.
Result and Impact
Following this plan, they have organized a workshop with local public and private stakeholders at upazila (sub-district) level, where representatives from trader associations, service provider associations, producer organizations, banks, cooperatives and private companies participated. Rajshahi Krishi Unnayan Bank participated in this workshop and shared details about their financial product which might be a feasible option for small producer. In the workshop, small producers showed their interest in receiving this credit offered by Rajshahi Krishi Unnayan Bank. Later, federation representatives met with the bank authorities several time and as a result of the discussions, Rajshahi Krishi Unnayan Bank sanctioned BDT 20,000 (195,5 EUR) in favor of Laili Begom for potato cultivation. After one year, BDT 2000 interest will be applicable.
Now, other producer organization members are interested to apply for similar loans from Rajshahi Krishi Unnayan Bank. This is a new window of opportunity for small producer as they are empowered to be part of an inclusive market.