In this case study, Narayanamurthy and his research team, in collaboration with SatSure, investigate how satellite imagery can be used to expand access to institutional credit for small and marginalised farmers in Indian agri-food supply chains. This investigation is leading to a new and nuanced understanding of the traditional institutional crop credit management processes, the bottlenecks present within, and the means by which those bottlenecks can be assuaged by exploiting the capabilities of satellite imagery. This case study will result in the design of an institutional crop credit mechanism that removes the existing inefficiencies including the politicisation of institutional credit, diversion of crop credit to non-agri purposes, and unmonitored usage of institutional credit after its disbursement.
Small and marginalised farmers in developing economies such as India primarily depend on credit for acquiring resources and raw materials such as seeds, fertilizers, and labour. The majority of such farmers lack access to formal sources of institutional credit (for example, loans from banks at nominal market interest rates) as they often have limited creditworthiness which is determined by the availability of capital and collateral. The resulting dependence on informal sources of non-institutional credit (for example, loans from money lenders at exorbitant interest rates) has been found to explain farmers’ low income and their relatively high suicide rates. For instance, over 60% of lending in Indian agriculture is dependent on informal sources of non-institutional credit. However, these informal lending disadvantages may be tackled by an improved accessibility to formal sources of institutional credit.
This impact case is based on field research, started in 2019, in collaboration with the firm SatSure. So far, more than 25 in-depth, semi-structured interviews have been conducted with various stakeholders, including financial institutions, satellite imagery experts, farmers, informal moneylenders, government officials, and agri-food academics/think tanks. In addition, SatSure has been closely observed in order to fully understand the types and value of different applications of satellite imagery data (for example, humanitarian rescue operations, solar farm installations, agri-insurance disbursement). This understanding will help in logically extending the capabilities of satellite imagery data to an institutional crop credit management setting.
Approximately 87% of Indian agricultural households are regarded as ‘small and marginal farmers’ possessing less than or equal to two hectares of land. Therefore, monitoring individual farm-level data is a key challenge for institutional credit providers, presenting a significant challenge and pushing small and marginal farmers into a reliance on non-institutional credit. Our investigation is demonstrating that satellite imagery integrated with institutional credit management can help address these key challenges, thereby making it feasible for all small and marginal farmers to access institutional credit. These preliminary outputs suggest that a significant proportion of the 60% of farmers currently relying on non-institutional credit can transition to institutional credit.
Currently, we are collecting more data to understand how satellite imagery capabilities can reduce the uncertainty and ambiguity in the transactions between the involved stakeholders. In addition, we are brainstorming the pilot rollout of proposed satellite imagery integrated with institutional crop credit mechanism to key beneficiaries. This, when achieved successfully, will open up interesting avenues for further research such as understanding how the dynamics between the stakeholders can change, and the roles government/regulatory institutions play in the execution of satellite imagery integrated institutional crop credit. This can potentially lead to two distinct impact case studies, with one focusing on the design and another focusing on the rollout.
Dr Gopalakrishnan Narayanamurthy
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