Rethinking farm loans in India

Chennai-based agrifinance company Samunnati is trying to solve credit flow by focusing on agricultural value chains rather than individual farmers.

Indian agriculture is fragmented; there are too many individuals doing the same thing, growing the same crop, facing similar problems, dying the same death. Farmer welfare policies in the country have been targeted at individual farmers, but the condition on the ground seems to have only worsened.

The unit economics don’t favour individual farmers—for over two-thirds of them, agriculture is a loss-making proposition. The average landholding in India has halved in the past five decades and stands at 1.08 hectares, according to the Agriculture Census 2015-16, and 68% of the farmers own less than 1 hectare.

At the root of the agrarian crisis is farmers’ indebtedness. “The traditional way of credit flow to small farmers doesn’t work. We need to think of more innovative and disruptive ways of farmer finance,” says G. Chandrashekhar, a Mumbai-based policy commentator and commodities market specialist.

Enter Anil Kumar S.G. In nearly three decades of working with rural Indian households as a banker, Anil Kumar became acutely aware of the crisis and the dynamics of farm loans. So, when he turned entrepreneur, he set out to tackle that problem. And he thought he knew where the solution lay—in aggregation.

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