INNOVATIONS IN RURAL AND AGRICULTURE FINANCE
Combining Extension Services with Agricultural Credit: The Experience of BASIX India VIJAY MAHAJAN AND K. VASUMATHI
FOCUS 18 • BRIEF 13 • JULY 2010 I
ndia has nearly 90 million farm households. More than 80 percent of these farmers operate on a small or marginal scale, farming
less than two hectares of land. They also usually have one or two buffaloes or cows, reared for milk and dung. Most of these small and marginal farmers fall below the poverty line. To reduce overall poverty in India, it is important to enhance the incomes of small and marginal farmers. One way to do that is to provide credit so they can get access to yield-enhancing inputs like seed, fertilizer, and cattle feed, as well as acquire irrigation pumps and crossbred cattle. But these kinds of investments alone will not raise farmers’ incomes. Agricultural and livestock development services are also crucial to give farmers knowledge of improved practices and strengthen their links to markets.
BASIX is an Indian livelihood promotion institution working
with more than a million poor households. Its mission is to promote sustainable livelihoods for a large number of rural poor people and women. When it started in 1996, BASIX’s primary focus was delivering microcredit to its customers. In 2001, however, BASIX asked the Indian Market Research Bureau to carry out an impact assessment, and the results were rather disappointing. Only 52 percent of the customers, who had received at least three rounds of microcredit from BASIX, showed a significant increase in their income (compared with a control group); 25 percent reported no change in income level; and 23 percent reported a decline in their income level. BASIX then carried out a detailed study of those who had experienced no increase or a decline in income and found that the reasons for these results could be grouped into three factors:
1. unmanaged risk; 2. low productivity; and
3. unfavorable terms in input and output market transactions.
This analysis made clear the need for
productivity enhancement, risk-mitigation services, and market linkages, as well as the need for rural producers to come together to amass greater bargaining power in the marketplace. In 2002, therefore, BASIX revised its strategy to provide a comprehensive set of livelihood promotion services to poor rural households. This livelihood triad strategy includes provision of financial inclusion services; agricultural, livestock, and enterprise development services; and institutional development services (Table 1).
What services are provided?
Under Agricultural, Livestock, and Enterprise Development (AGLED) services, BASIX currently provides services to farmers growing nine types of crops
Financial Inclusion Services
• Savings (directly in districts where BASIX has a banking license, and through other banks elsewhere)
• Credit: agricultural, allied, and nonfarm, short and long term
• Insurance for lives and livelihoods, including weather index-based crop insurance
• Money transfer, for migrant workers
• Experimental products: micropensions, warehouse receipts, etc.
Source: BASIX.
(cotton, groundnut, soybean, pulses, paddy rice, chilies, vegetables, mushrooms, and lac [a form of organic resin]) and two livestock products (dairy and meat [sheep and goat]). Nonfarm business development services are also provided in selected activities like tailoring, woodworking, bamboo work, and retail stores.
How are services delivered?
BASIX works in more than 25,000 villages through a network of 150 branches, each with five field executives under a team leader. Each field executive supervises five livelihood service advisers (LSAs), who each cover about 10 villages, originating credit, selling insurance, and collecting repayments. The LSAs also sell AGLED Services. BASIX has more than 3,000 LSAs.
BASIX field executives identify and select villages or clusters
of villages to receive these services. A cluster is a group of villages within a radius of 6 to 8 kilometers—a size that includes a reasonable customer base for delivering services effectively and efficiently. The branches start enrolling customers for services in those villages where there are at least 30 existing borrowers for either crop or livestock activity. BASIX has built a cadre of nearly 1,000 livelihood services
providers (LSPs). LSAs function as BASIX salespeople, whereas LSPs are similar to extension agents. An LSP works with BASIX on a regular basis and is typically a high-school graduate with training as a para-extension worker or a para-veterinarian. He or she covers 200–400 customers for one crop or activity. BASIX distributes product brochures in regional languages telling customers what
Table 1—Services included in the BASIX livelihood triad
Agricultural, Livestock, and Enterprise Development Services
• Productivity enhancement: through increased yields, use of improved seed varieties or practices
• Productivity enhancement: reduction in costs
• Risk mitigation (other than insurance), such as livestock vaccinations
• Local value addition, such as processing cotton into lint before selling
• Alternative market linkages: input supply and output sales
Institutional Development Services
• Individual-level awareness building, skill enhancement, and entrepreneurship development
• Formation of groups, federations, and cooperatives of producers
• Functional training in accounting and management information systems, using information technology
• Building collaboration to deliver a wide range of services
• Sector and policy work: analysis and advocacy for changes and reforms
FOR FOOD, AGRICULTURE, AND THE ENVIRONMENT
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