The present economic condition of the farmers is their dependency towards debt financing in order for them to cultivate their lands. Few farmers can afford to buy in cash all the necessary inputs used in their farms. Majority of the farmers are borrowing from traders their farm inputs and cash capital. It is a fact that these borrowed capital are high interest bearing. We cannot blame the farmers in borrowing from the traders because they are left with no option, most if not all, are not able to till their farms if they don’t borrow from them. This is an opportunity to the traders to exploit the farmers. Aside from the high interest, prices of the inputs are valued at a higher price if borrowed. When harvests come, the traders will buy the products of the farmers when price is low. The farmers cannot stockpile their produce and wait for higher prices because it is the traders that set the time when they get farmers’ products. They will time it when the price is low. This scenario can be avoided if the farmers have other financial institutions that offer lower interests on loan and provide mechanism to help them build up capital and savings for future use. The borrowed capital from the traders is paid one time during harvest time. When planting season comes, they again borrow capital from them. This is already a cycle and most of the time the deficits of the farmers are growing; hence, they cannot liberate themselves from indebtedness to the traders. There’s a need for a financial institution that offers payment scheme that will liberate them from one-time payment scenario. One of the possible solutions is the creation of a financial institution that offers micro-credit business. The farmers will be given the opportunity to pay off their debts in weekly installment basis. By the time they finish paying their weekly amortization; they can avail their loan in full amount and can effectively use it in their farms.
Posted on: Sun, 14 Jul 2013 11:37:19 +0000
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