Using right tech to get financial access for under-financed aqua farms
By Aditya Dash
It is easier and quicker for me to get a car loan than to get a loan for farming shrimp. Keep in mind that for every 1 hectare of shrimp farmed, 10 jobs are created across the value chain, as per Dr Uday Sethi’s study for Gujarat government.
Mark Kahn of Omnivore Ventures acknowledged this fact at the GOAL conference Chennai 2019. How the shrimp and aquaculture sectors are heavily under-financed, and he was speaking about the big
players like feed manufacturers and processors, imagine the problems for the smallholder farmers who form the backbone of the industry.
Recently, Rabobank Foundation and World Bank had organised a very interesting webinar on financial access for smallholder farmers. They highlighted the problems faced by them, which is especially acute in aquaculture since more money is required.
A banker is more comfortable in financing an exporter for their working capital needs or to construct a new factory rather than finance 1,000 farmers for the same amount. The transaction cost is too high, there is the problem of credit scores and reliability of information and how to monitor and verify once the funds are disbursed.
Tech can overcome legacy problems
With the emergence of startups in aquaculture technology and financial technology, it is possible to overcome these traditional problems. Take Raj Manohar’s AquaConnect with his vision of becoming the Amazon of aquaculture. Their latest new offering is a solution for the banking and financial service sectors. Through satellite imaging, their farm management app FarmMojo and real time verification, they seek to provide a “phygital” solution to the financial sector.
This kind of an approach has a lot of potential and it can further tap into other emerging technologies such as P2P lending, so that the smallholder farming doesn’t have to simply rely on the village moneylender at an interest rate of 36 per cent. A case can be made for a B2B marketplace, and the key offering to stakeholders across the value chain would be that they become part of a community of trustworthy members.
Crop insurance is required for aquaculture
The two biggest risks for aquaculture operations are disease and threat of cyclones. The main reason why aquaculture industry developed in North America and Europe is due to access to institutional finance. This was possible due to insurance and here we need Government intervention. Indonesia has a good policy for smallholder farmers. I am still trying to get an English translation of their policy. A cyclone insurance cover for shrimp farmers would give a big boost for bankers and financial institutions to lend to this industry.
Existing schemes such as NABARD haven’t had much success in Odisha. This again relates to the problems the smallholder farmer faces as far as paperwork is concerned. Even the priority sector lending targets set by the Government do not really trickle down to the smallholder farmer. A certificate system has emerged where most private sector banks buy these certificates from PSU banks. The recently launched Pradhan Mantri Matsayajibi Kisan Yojana (PMMSY) is very ambitious scheme and it covers all aspects of aquaculture industry. I do hope that the bulk of the money and benefits go towards the shrimp farmers of Odisha and West Bengal who are the poorest of the lot as opposed to encouraging shrimp farming in Punjab and Haryana.
Odisha Govt should pay attention
It is high time Odisha Government has a separate Ministry for Fisheries and Animal Resources Development should be part of Agriculture department. Odisha needs to follow the example of Vietnam and Thailand and look at aquaculture as an industry of strategic importance. I would urge the Central Government, State Government and the private sector to ensure that we implement and execute projects that serve the smallholder farmer. If you want to walk fast, walk alone, if you want to walk far, walk together.
__ The author is an “Authority Member” of Marine Products Export Development Authority. He is also Managing Director of Ram’s Assorted Cold Storage Ltd, the seafood exports division of Suryo Group. He is passionate about aquaculture and writes frequently on it.