INNOVATIONS IN AGRICULTURAL SUPPLY CHAIN FINANCE 17th March 2007 Presentation by Kishore Kumar N.S. Executive Vice President (Agriculture Business & Microfinance) HDFC Bank Ltd
· Supply Chain output leakages and price inefficiency. · Small and marginal farmers · Fragmentation of land · Dependence on traditional revenue streams. KEY CONCERNS
KEY REQUIREMENTS FOR EFFECTIVENESS OF SUPPLY CHAIN FINANCING C Scale of operation C Production flexibility C Assured input supplies C Strategic tie-ups C Quality control and traceability C Communication and transparency
INNOVATIONS TO COUNTER / MITIGATE CONCERNS C Non-cash disbursals of crop loans - for direct input supplies from manufacturers of fertilisers, seeds, etc., as part of channel finance for Corporates. C Financing based on contracts through large retailers / processors / exporters.
C Huge scope in horticulture, where cold chain is extended by buyers C Formation of small / marginal farmers into SHGs to absorb microfinance, not merely from growing crops but for agri trade INNOVATIONS TO COUNTER / MITIGATE CONCERNS Contd…
SUPPLY OF SERVICES C Financing agricultural extension From Source-Universities To User-Farmers INNOVATIONS TO COUNTER / MITIGATE CONCERNS Contd…
EVOLVED FINANCING MODELS INNOVATIONS TO COUNTER / MITIGATE CONCERNS Contd… Farmer Credit Risk Supply Chain asset backed Cash flow financing
C Financing ICT innovatives / delivery channels servicing farmers. C Integrated effort to rural “family” financing - one family, multiple enterprises, reducing dependence on farm income - intra family supply groups. INNOVATIONS TO COUNTER / MITIGATE CONCERNS Contd…
SUCCESS STORIES C Agglomeration of tribals for microfinance in organic farming for exports. C Engagement of NGOs to coordinate groups of small farmers to identify crop surpluses, grade, store, transport and collect payments.
SUCCESS STORIES C Customised financing for Micro Dairy farming and logistics through corporate tie-ups. C Marketing linkage of sericulturists with weavers, backed by firm offtake by textile company. Contd…