Purpose
– The global demand for food is expected to increase by 60 percent by 2050 when the world’s population reaches 9.1 billion. To meet this challenge significant investment in the agricultural sector is required to embrace innovative financing mechanisms that can benefit sustainable agricultural development, food security and nutrition. The purpose of this paper is to analyze the agricultural value chain (AVC) financing approaches and tools in India. It presents a proper understanding of the different case studies of Indian AVC financing models and related instruments. It also offers some useful recommendations to improve their efficiency.
Design/methodology/approach
– The authors employ the multiple case studies approach to research which allows for a purposive sample and the potential for generalizability of findings. This provides a more rigorous and inclusive approach than a single case study research due to the triangulation of evidence. Subsequently, the authors offer an explicit description of AVC financing models. In the next phase, a thorough assessment of these models is made. Finally, the authors formulate some useful policy recommendations based on the findings of the analysis.
Findings
– There is a need to review the value chain models that exist in the context of – lead actors, business model and sustainability strategy. Determining actual and critical points of finance such as the current flows of funds and their sources of financing, what is needed and in what point in time is significant to enhance the effectiveness of the models. Further, there is a need to analyze and compare financing options such as their relative strengths, risks and costs of financing for each level of participant in the chain. The authors observe that rather than investing in one component of the chain, the financial institution can grow expertise in the chain, share this knowledge and provide financing to support services. This not only benefits clients, but also expands lending opportunities while lowering the risks.
Research limitations/implications
– The study primarily focusses on AVC financing approaches and tools in India and attempts to analyze the inadequacies in the value chain models. The case study approach is adopted as the accurate data on value chain financing are not available for the analysis.
Practical implications
– The study has come out with the following policy recommendations: the governments (union government as well as state governments) – in partnership with the private sector need to spearhead and develop measures aimed at making the operation of the value chain efficient, fair, profitable and sustainable; governments have to focus on creating an enabling policy and regulatory environment and, providing the necessary support services in order to attract more investments. These will lower the transaction costs, facilitate the smooth flow of finance along the chain and ultimately increase value-added; financing for processing and marketing is particularly crucial for growth and expansion of the chain; bank finance should not be limited to short-term production loans, but also include big-ticket loans with longer maturities to finance investments in farming equipment and machinery, transportation, storage, mills and other processing/post-harvest facilities.
Originality/value
– This study is the first of its kind as it is based on a multiple case studies approach in understanding and analyzing the efficiency and effectiveness of AVC financing models in India by evaluating eight of such models. Besides, it offers quite useful policy recommendations to improve their efficiency.
The Assessment of Value Chain and Value Added Analysis of Maize (Case Study in Konawe District, Southeast Sulawesi Province)
