Financing

Here's a set of guidelines for FPO financing from NABARD on funding requirements at each stage of setting up an FPO, different sources of finance for FPOs. It also outlines schemes and policies relevant to FPOs – NABARD and NABKISAN schemes, schemes under small farmers agribusiness consortium, National policies for promotion of FPOs, and State policies for Odisha, Karnataka, Tamil Nadu, Punjab, Kerala, Andhra Pradesh, Madhya Pradesh, Maharashtra.

According to a report from Azim Premji University (2022), less than 4 per cent of the FPOs have paid up capital of more than ₹10 lakh. Further, many FPOs are unable to access required financial support from banks/financial institutions for lack of collateral security and credit history. Credit guarantee cover from Small Farmers Agri-Business Consortium (SFAC) in respect of collateral free-lending is available only to the FPOs with a minimum membership of 500 and above. Therefore, very few FPOs have adequate equity capital base to obtain matching grant of ₹15 lakh from the government.

A snapshot from Andhra Pradhesh's Operational Guidelines for FPO, 2016

Moreover majority of the FPOs sell their produce without value addition due to inadequate working capital, information asymmetry on demand-supply gaps, and lack of post-harvest infrastructure facilities.

Here are a list of banks and NBFCs offering financing for FPOs:

1. ESAF FPO Finance
2. RBL Warehouse receipt financing & financing for cold storage
3. Sammunati's Input & Output procurement loans for Farmer collectives
4. Working Capital Loans by Nabkisan - a subsidiary of NABARD.

Here are a list of enterprises supporting FPOs with market linkages and financing:

1. Dvara Registry backed by Omnivore, based in Chennai With a vision to address the problems faced by FPOs and farmers, Dvara E-Registry has created the Doordrishti Platform, a “Success Platform for FPOs and Farmers” that addresses their challenges by providing integrated farm services, analytics and financial solutions. Doordrishti reaches out to the farmers via FPOs providing innovative solutions to their problems both at an organisational and individual level.
2. Arya.Ag from Noida offers financing services like Escrow account, Line of Credit and more.