Taking note of the dependence of Punjab’s small and marginal farmers on non-institutional sources for funds, Nabard (National Bank for Agriculture and Rural Development) has chalked out a strategy wherein the state’s banks will provide them comprehensive financial services.
The motive behind the idea is to ensure a wider reach to rural credit from institutional sources, thus save the farmers from the clutches of usurer money-lenders.
The move comes against the backdrop of the state’s 2009-10 annual budget that pegged the rural debt at Rs 35,000 crore. Of this, Rs 22,000 crore is institutional debt, while the rest is debt towards money-lenders and arhtiyas.
Delhi-headquartered Nabard, in a bid to provide credit linkages to the marginalised in society, has suggested to the banks to resort to innovative approaches that would address the money remittance and micro saving needs of the rural population which is bound by the conventional system wth its own set pf limitations. The services of civil society organisations, farmers’ clubs and NGOs among others, as “business facilitators” or as “business correspondents” may be utilised to increase the physical outreach of the banks.
The country’s apex development bank has further stressed on specific interventions that are required to cater to the remittance needs of the state’s large migrant workforce engaged in agriculture, industry, security jobs, construction works, etc. Further, banks can use their infrastructure to extend various types of financial services. They need to explore new distribution channels and marketing techniques through collaboration with the postal department, pharmacies, supermarkets, railway stations and bus terminuses among others.
The 1982-founded Nabard has asked the banks to focus on the needs of the small borrowers and simplify the procedures to avail credit.
Also, in the context of financial inclusion, the scope of financial education is relatively broader. It acquires greater significance, as it may involve addressing deep entrenched behavioral and psychological factors that could be major barriers. All agencies or banks, therefore, need to focus on financial literacy and financial counselling. A financial literacy programme and credit counselling may be taken up on a priority basis in the state for the benefit of the excluded/sidelined sections of society.
Nabard also suggested that the linkage between self-help groups and banks which has proved to be sustainable model may be further expanded with focus on low off-take at the district and block levels. Also, banks should adopt the joint liability group model so as to evolve a strategy to lend to the small marginal farmers and artisans/small entrepreneur. Further, micro-insurance should be linked to micro credit to bring down the inherent risk cost of lending. Communities that are at risk also can benefit from micro-insurance products, for which low-income households pay a small premium for limited coverage for specific risks.
The strategy also suggests that focus should be given to building the entrepreneurial skills of the excluded segment to increase their scale of operations and enhance their credit absorption capacities. The provision of easy credit will encourage first-generation entrepreneurs to initiate new venture, aggravate capital formation in society and create new employment opportunities -- all of which will help boost the country’s economic development.
