India is an agrarian economy and agriculture continues to be the mainstay of the Indian Economy, whose contribution to the national GDP is about 25% and provides livelihood for nearly 65% of the population. It also contributes 21% of the total export and raw material to several Industries. This sector has tremendous potential for further expansion of employment opportunities and consequently mitigating the levels of rural poverty.
Challenges like access to finance for various agricultural value chain players, storage/warehousing facilities to store harvested commodities and market linkage for producers to sell their final produce are limiting the growth in the agriculture sector in India. Financial service providers face distinct challenges when dealing with this sector. The seasonal nature of production and the dependence on biological processes and natural resources leaves producers subject to events beyond their control such as droughts, floods or diseases. Land is the most widely accepted asset for use as collateral but there are often problems with title and property rights in rural areas and small loans rarely justify the costs of legal action to call in a claim on land and then liquidate it. Movable assets such as livestock and equipment are also fairly high risk without proof of ownership and insurance cover.
IFMR Capital aims to enable access to finance for various players of the Indian agricultural value chain who require financing for activities such as input supply, production, distribution, wholesale, processing and marketing. IFMR Capital offers innovative and customised financing solutions to its partners in this space. It believes that an efficient financial solution will ensure that the benefits of financing trickle down to the last mile farmer.
As part of our newest asset class, we have on-boarded agriculture Originators offering commodity backed loans, providing warehousing services, commodity management and commodity procurement services. Given the size of agriculture sector in India and the potential business opportunity in this sector, IFMR Capital intends to scale this vertical further in the years to come.