Introducing a Sustainable Cashless Credit Ecosystem in India to Boost Agrarian Economy

Despite India’s agrarian economy contributing 20.2% to the country’s GDP in 2021-2022 and a large number of farmers in the country, there has been an increase in farmer suicides in recent years. Why is the number of farmer suicide cases in the country increasing every year?

In India, the socioeconomic status of farmers can vary significantly, with some farmers who have more resources being able to turn a profit while others, particularly small and marginalized farmers, struggle with debt. This can be attributed in part to the fact that only 79% of large-holding farmers have access to financial support from financial institutions, while only about 45% of small farmers are able to approach these institutions with similar support. As a result, small and marginalized farmers may turn to money lenders who charge high-interest rates, leading to a burden on debt.

The lack of access to affordable credit options can lead small and marginalized farmers in India to turn to more expensive rural credit options, starting a cycle of debt that can be difficult to escape.

Is Cash the Culprit?

One of the main contributing factors to the cycle of debt for farmers in India is the reliance on cash, which can be difficult to manage and is not easily traceable. When farmers borrow money with the intention of using it for agricultural purposes, they may end up using it to meet other expenses or pay off previous debts, resulting in a lack of funds for agriculture, which is their primary source of income. Poor money management and the failure to prioritize agricultural inputs can also contribute to this cycle of debt.

How to support the agrarian economy?

One way to help the small and marginalized farmers in India avoid agricultural debt is by providing them with access to fair credit that can only be used for farming inputs. This can help ensure that the credit is used efficiently and effectively.

CreditAI has introduced a closed-loop system in India that aims to create a sustainable cashless credit ecosystem for the agrarian economy. The system aims to eliminate the use of cash and provide traceable cashless credit to small and marginalized farmers through a unique platform that uses a farmer credit score based on the farmer’s previous year’s yield, previous loans, and repayment history. This system helps small and marginalized farmers to be eligible for financial support from financial institutions and provide them with an identity and credibility.

CreditAI works with financial institutions to provide farmer credit cards that allow farmers to access fair credit. The inclusion of Farmer Producer Organizations (FPOs) in the closed loop credit system helps ensure that the credit is used only for agricultural inputs. CreditAI acts as a full-stack tech and service model for financial institutions, assisting with onboarding, disbursement, end-use monitoring, and collection of funds to enable secure lending to farmers.