Helping farmers: Financial inclusion of rural dwellers encouraged

Lecturer suggests Trader Agent Intermediated Lending approach.

KARACHI:

One of the primary aims of policymakers in developing countries is to use innovative ways to encourage financial inclusion of the rural poor. Enabling poor farmers to diversify into high value cash crops is one of the best ways to achieve this goal, but farmers lack collateral.

This was stated by USA Boston University, Professor of Economics, Dilip Mookherjee at Zahid Hussain Memorial Lecture organised by the State Bank of Pakistan at Islamabad.

The lecture was attended by high level government officials, federal ministers besides faculty members of various universities and bankers.

In his lecture, Prof. Mookherjee expounded a new approach towards financing of smallholder agriculture in developing countries.

Mookherjee added that existing microfinance products only play a limited role in financing cultivation by poor farmers. “Indeed, most microfinance include high frequency repayment, loan officials actively discourage risk taking, and group-members that share loan repayment liability exert peer pressure,” he said.

In this context, he particularly emphasised the role of ‘Trader Agent Intermediated Lending (TRAIL)’ approach for financing the agriculture sector.

Prof. Mookherjee shared that the TRAIL approach yielded better results as compared to Group-Based Lending in terms of loan take-off preferences, timely repayment, impact on production and profit of the small farmers.

In light of his experience, Prof. Mookherjee suggested that “TRAIL is thus an innovative financial product with potentially large development impacts, at lower costs for the lender.”

Published in The Express Tribune, January 21^st, 2015.

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