Agriculture Finance in general and institutional agricultural finance, in particular, are becoming more important today than ever before. To increase production and productivity varieties of seeds, fertilizers, insecticides must be used. Modern inputs can be used if they are provided on time and through a credit system offering loans at a reasonable rate of interest. Agricultural credit becomes more important, particularly when the agricultural development process is shifting to modern methods and packages of practice.There are various sources of the agricultural finance they are non-institutional sources and the institutional sources .The various non -institutional sources could be Moneylenders and landlords ,Traders and private borrowings and the various institutional sources are Cooperative societies ,Agriculture Development Bank, Nepal (ADB/N),commercial bank ,Grameen Bikash bank and other NGo's and other financial institutions.
Agricultural Finance in general and institutional agricultural finance, in particular, are becoming more important today than ever before. To increase production and productivity, varieties of seeds, fertilizers, insecticides and fungicides must be used. But these modern inputs must often be purchased on cash payment. About 65.74% of Nepalese people are dependent on agriculture. The vicious circle of poverty has become a great problem for the Nepalese farmer. Nearly 24% of the people live below the poverty line.
Modern inputs can be used if they are provided on time and through a credit system offering loans at a reasonable rate of interest. Agricultural credit becomes more important, particularly when the agricultural development process is shifting to modern methods and packages of practice. Commercial banks and regional rural development banks are also involved in disbursing credit to the agricultural sector. According to the Nepal Rural Credit Review study conducted by Nepal Rastra Bank the share of the informal finance is supplied by several agencies.
Sources of Agricultural Finance
1. Non-institutional Sources
The main sources of non-institutional agricultural finance are moneylenders, landlords, traders and private borrowings.
Moneylenders and landlords: From the very beginning, moneylenders are the main suppliers of short-term and long-terms credits to Nepalese farmers. They provide the loan to the farmers for productive as well as unproductive purposes. Their loan advancement process is flexible and the loan has fixed repayment. The money lenders are somewhat flexible about the execution of documents and the security to be obtained.
Traders and private borrowings: They provide short term loan to the farmers for productive purposes before the harvest is ready on the condition that they (the farmers) will sell their products to them at pre-determined prices, which are usually very low, compared to prevalent market prices at the time of harvest. This type of loan assumes greater significance in the case of food grains like paddy, wheat and cash crops like cotton, jute, tobacco, cardamom and sugarcane.
2. Institutional Sources
The main suppliers of the institutional agro-finance are as follows:
Cooperative societies: The establishment of credit cooperatives in 1956 in the Rapti valley of Chitwan district marked the beginning of institutional credit to the rural sector in Nepal. However, credit cooperatives were formalized only under the Cooperative Societies Act in 1959. But it was only in 1963 that the cooperative Bank (which was converted into the ADB/N in 1968) was established with a view to providing credit support to the cooperatives.
Agriculture Development Bank, Nepal (ADB/N): ADB/N was established in 1968 as the development bank in line with the ADB Act of 1967 with the objective of bringing about at national level all-round development in the agricultural sector. Now, it has completed 44 of service. ADB/N is a friend of Nepalese farmers.
Commercial banks: Commercial Banks are also a major source of agro-finance. There are 32 commercial banks in Nepal. They have started providing the agro-finance after the introduction of the Priority Sector credit program in 1974. The priority sector loans are broadly categorized into three sub-sections, namely agriculture, cottage industry, and services.
Grameen Bikash Banks: Five Regional Rural Development Banks- Purbanchal and Far Eastern Grameen Bikas Bank (1992), Midwestern and Western Grameen Bikas Bank (1995) and Central Grameen Bikas Bank of Bangladesh, with the realization that traditional banking system did not help to improve the economic condition of the rural poor because it could not set targets for the rural poor and the credit delivery mechanism. The Grameen Bikas Banks are concentrated in the rural areas of the terai belt. Group members sit on guarantee on each other's loan. No other physical collateral is required.
NGOs and other financial institutions: Nepalese farmers are also benefitted from Grameen Swabalamban Fund (under NRB), Nirdhan (under the principle of Grameen banks) and other NGOs operating in villages.
Agricultural Marketing In Nepal
The development of an agricultural marketing system is one of the most important factors for increase of production and productivity. A well-developed agricultural marketing system allows for the judicious investment of farmers' resources. Farmers can harvest maximum benefit from farming. Food grains are produced in all the agro-ecological regions of Nepal, but the Terai is regarded as a food grain surplus area and the hill and the mountain region as deficit areas. Since Nepal's agriculture is predominantly of a subsistence type, only a small proportion of agriculture products enter the market. The Government of Nepal has introduced the concept of minimum support price scheme as an incentive to the farmers.
Nature of Agricultural Marketing in Nepal
Main features of agricultural marketing in Nepal are as follows:
Sales in villages Nepalese farmers are forced to sell what they have produced in their own villages. A great majority of farmers suffer from acute poverty, So they are compelled to borrow from the private money lenders to whom they are bound to sell major portions of their product at lower prices soon after the harvest. The farmer also sells one-third of their products to brokers and traders. A large part of their income from the sale of crops goes for paying off the debts and buying seeds and fertilizers .
Sale in market After all, these farmers have only a small portion of the crop left with them to bring it for sale in the market which is organized as well as unorganized may also be full of evils. Generally, the weighing of agricultural crops is not accurate. The agents in the market also favor merchants. Thus, the farmers are exploited in the market and do not receive the reasonable price for his produce.
Cooperative marketing A large number of cooperative societies were registered after the implementation of plan development process in Nepal, but only a few cooperative societies are operating in the country. The cooperative (Sajha) was organized for the purpose of providing benefits to the poorer section of the society. Marketing of agricultural producers should also be handled by 'Sajha'. However, the Sajha movement could not do much to facilitate the marketing of agricultural producers and the farmers could not get as much benefit as they had expected. In recent days, farmers have established cooperatives as different forms by their self-efforts to sell agro-products.
Problems of Agricultural Marketing in Nepal
Lack of adequate institutional credit About more than 24% of Nepalese people live below the poverty line. Some financial institutions like ADB/N and Grameen Bikas are not yet available in rural areas. Hence, the farmers borrow from the village moneylenders who charge high rates of interest. They need to sell their product, (immediately after harvest) to be able to pay back their debts and to meet their day-to-day needs.
Lack of transport and communication In most of the districts of Nepal, transport facilities are not available. Even where transport facilities are not available they cannot be used during rainy seasons. Due to this reason, farmers are not able to take their products (especially the perishable goods) easily to market centers and sell them at reasonable prices. Even when they bring their products to the market by carrying them on their back they have to bear higher transit cost. Likewise, farmers cannot get useful and relevant information about agricultural marketing because of the lack of minimum communication facilities. Farmers are often unaware of the current market price of their products and have to sell them at lower prices.
Lack of storage facilities Many farmers in rural areas are compelled to sell their product immediately after harvesting at a relatively lower price due to lack of storage facilities. They are bound to store their food grains in the traditional manner which destroys their product by heat, rodents, rain, pests etc. Moreover, perishable goods are more adversely affected due to lack of cold storage facilities.
Lack of grading and standardized facilities Products of high quality fetch reasonable prices. But most of the farmers are illiterate and unaware about quality grading. Firstly, the agro-products of our country are of low quality because of unimproved seeds, crop diseases, the defective system of crop cutting and the lack of storage facilities. Secondly, the better crops are not sold on the basis of grading better. Consequently, farmers do not get a good price for their products.
Lack of organization of cultivators Nepalese cultivators (farmers) are not organized like the traders. The reason for the deficiency in an organization is individualized family work done in smaller land units.
Problem of adulteration Adulteration or mixing of inferior products with superior one is a common practice among traders in Nepal. Sand in food grains, water in milk, mineral oil in edible oil are some commonly found adulteration methods. Adulteration is generally practiced by middlemen.
Remedies for Problems of Agricultural Marketing
The measures that can be adopted to remedy the existing problems observed in agricultural marketing system may be as follow:
Transport and communication facilities, such as rural roads etc, should be extended to rural and remote areas. This will help the farmers to transport their products to the market centers.
Agricultural microcredit should be made easily accessible to farmers without procedural difficulties at reasonable interest rates from the organized financial institutions to safeguard poor farmers from being exploited by local moneylenders.
Provision of shortage and warehouse facilities should be available so that farmers are protected from the compulsion of selling off their goods at harvesting time only. This can facilitate farmers to get a reasonable price for their products.
Standardization, grading and weighing system should be enforced in rural areas also to improve the marketing efficiency and order. This can greatly benefit both producers and consumers in terms of cost and price.
Reliable and relevant market information system is established for supply, pricing, location and quality of agricultural goods. This enables farmers to make right decisions on their products and prices.
Rules and regulation about the ethical behavior of traders, seller and consumers and quality, grading, control of adulteration, etc should be imposed and executed effectively and efficiently for proper regulation of fair agricultural marketing system.
Coordination between government, private sectors, farmers, traders and other civil societies should be improved to facilitate smooth development of the interest of agricultural and marketing institutions.