Farmers are provided financial assistance of up to 40 times their savings

Farmers know the difficulty in obtaining loans for their farming activities in the country.

Though many financing institutions promise all necessary help to farmers, sadly most of it remains only on paper.

The Kshethra Dhamasthala Rural Development Project (SKDRDP), an NGO in Dharmasthala effectively makes use of the self help group approach called pragathibandhu for promoting union among small farmers and to access loans for its members.

Charitable organization

Started as an charitable organization some two decades ago to provide subsidy to small farmers in villages around Dharmasthala, the NGO today is one of the biggest in the country.

Today, active in nine districts of Karnataka the NGO has so far promoted 1,16,500 self help groups (SHGs’) and a cumulative membership of 12,85,000 families. These SHGs’ maintain a cumulative savings of Rs. 258.00 crores as on September 2010.

“Till date we have provided credit to the extent of Rs. 1919.00 crores. The interest rate charged at 15 per cent (reducing balance) is considered as the best in the sector. Besides loans we also provide training and capacity building, technology, community development, marketing support to the farmers,” says Dr. Veerendra Heggade, Dharmadhikari.

According to Dr. L.H. Manjunath, Executive Director, the loan helps in realizing the dream farm plan to the pragathibandhu members. Each member saves Rs. 10 every week. We provide financial assistance of up to 40 times their savings.

“This saving is called as fund and not loan as we expect the farmers to treat this money with respect. Normally, we borrow bulk funds from commercial banks at interest rates of around 10 per cent for lending to the group.

Repayment time

“The members get a repayment period of 3 to 5 years however, the money must be repaid in weekly instalments. No member can say that he pays back the loan from the returns of the crop for which he has invested,” he explains.

For example a farmer borrowing Rs. 20,000 for cultivating arecanut has a gestation period of 5 years, after which he needs to repay the money in 156 weeks at Rs. 156 every week.

For this purpose the member will have to resort to subsidiary occupations like dairy, floriculture, betel leaf or labour work to repay the loan.

So far lending by commercial banks to farms has been activity specific expecting repayment to come from the incomes from that activity.

For instance the bank finances sugarcane cultivation and wait for 18 months for the sugarcane yield to come before demanding recovery of the loan.

If sugarcane crop fails, yields less or there is market crisis the farmer is totally unprepared and faces balance sheet crisis.

Where as in the pragathi bandhu innovation looks at daily income of the farmer and encourages him to take up mixed farming that increases his income source.

Small revenues

For example a farmer takes up plantation crop, cash crop, vegetable cultivation floriculture fruit crops, dairy farming, poultry, apiary, etc all of which bring in small revenues to the farmer and reduces the risk on any one crop.

“The farmer also manages his cash flow daily to pay small amounts from his net surplus to the loans borrowed by him.

“For instance the farmer pays back the sugarcane loan in weekly instalments from his other incomes without waiting for sugar cane yield. When his sugarcane starts yielding he has already paid back his dues and his dependence on sugarcane actually comes down. He is able to manage the risks on sugarcane production and marketing confidently. In short SKDRDP has redefined the lending to small farmers,” says Dr. Heggade.

The application for the loan is generated by the group after discussion with the members and based on the farm plans of each member.

The applications are then vetted by the village level federation of the SHGs who constitute a subcommittee for recommending the loan.

Loan sanction

The applications are then submitted to the field worker after the recommendation of the subcommittee, who then submits it to the appropriate authority for sanction.

“Normally, the time taken from generating the application at the group level till the release of the cheque is 15 days. If there is emergency, loans are released immediately. At the same time bigger loans are appraised before release and therefore may take a little more time,” says Dr. Manjunath.

For more details contact Dr. L H Manjunath, Executive Director, SKDRDP, Dharmashri Building, Dharmasthala, Blethangady Taluk, Dakshin Kannada District, Karnataka – 574216, email:, mobile: 09448469009, phone: 08256-277215.