The agricultural sectors contribution to the GDP is less than half of the percentage of countrys labour force deployed in the sector. Yet this productivity shortfall underscores the opportunity - lower yields derived from major crops are found directly related to the farming inputs used and techniques practiced by small growers whose landholdings are greater in number.
Credits availability, terms and pricing have been appreciated by Agri economists as potent factors that determine the crop yields and hence incomes of small scale farmers. Micro lending in the agricultural sector has been offered by both the public and private sectors for quite some time now. Years of field experience and institutional memory, however, demand innovative financing models for the sector.
One such model has been tested and up scaled by Pakistans "National Rural Support Programme" - a 21-year old not-for-profit that touches over one million poor households in Pakistan. Dr Rashid Bajwa, the CEO of NRSP, shared the details of the innovative research project called "Sugarcane Production Enhancement Project", while writing in a latest feature for World Banks CGAP research policy institute.
Launched in 2001, the SPEP project aimed at addressing issues of credit access and advisory services by enrolling some 1,800 sugarcane growers in Rahim Yar Khan District. Growers included sharecroppers and farmers which had landholdings of around three acres. The model effectively brought together the grower, the microfinance provider and the processor (sugar miller).
Dr Bajwa specified that the loans were meant for input purchases and typically ranged between Rs7,000-Rs10,000 per acre. The farmers were also provided with yield enhancement advisory services - acting on the advisory was requisite for loan disbursement. As per an agreement with the NRSP, local sugar mills would purchase these growers output with instant cash after deducting NRSPs loan & service charges.
The results seem really encouraging. Dr Bajwa noted that initially, after three years, the number of enrolled farmers in the NRSP programme had doubled. A third of these growers were able to increase their sugarcane yield per acre by over 63 percent, while the rest also managed a sound yield increment of over 42 percent compared to earlier average yields of 19 tons per acre.
Apparently, there was something for everyone in this project: small growers improved cane yields and increased their incomes; the local sugar mills benefitted from high sucrose-yielding cane; and the NRSP recovered its loan portfolio and associated charges at source (sugar mills) with negligible recovery staff.
Dr Bajwa highlighted that after all these years; this three-way engagement helped develop local irrigation and provided technical guidance vis-à-vis seed and farm equipment. More than 19,000 small holder farmers availed the NRSP loan window in FY12. Now the SPEP has been up scaled in 44 UCs of RYK district, and 15 percent of the districts sugarcane supply to the mills is catered by these growers.
As this decade-long project shows, a collaborative financing model built on lines wherein the interests of various stakeholders in the value chain converge, is a practical way to address the small growers woes. On a related note, this model also shows that it is possible to break the foothold of middlemen in the rural Agri markets and the abstract power of Aarhtis in Pakistans agricultural heartlands.