Preamble

The said scheme will be group based financing scheme for small farmers who do not have tangible security to offer to banks as collateral. The scheme has been structured on group based lending approach wherein banks can finance to individuals through Small Farmer Groups. With the success stories of innovative lending techniques like Group basedLending (Grameen Model), Self Help Groups (Indian Model), Solidarity Group (LatinAmerica Model), Community based Organization (Village Banking) and other approaches; there is paradigm shift in the lending methodologies to the smallfarmers/borrowers. The Grameen of Bangladesh, Bank for Agriculture and Agricultural Cooperatives (BAAC), Thailand and Bank Rakyat Indonesia (BRI), have proved to be most successful agri/rural sustainable financial institutions serving mostly to small farmers. The success of these financial institutions has broken the myth that people without tangible assets can neither pay the real cost of credit, nor save, and in general are poor credit risks.

Purpose

The scheme will target farming community involved in small agri related activities i-e livestock, dairy, poultry, fisheries, horticulture etc

    Crop Sector Activities:

Farm credit includes production loans for purchase of inputs like seed, fertilizer, pesticides etc. Production loans also include working capital finance to meet various expenses attributing to farming.

    Non - crop Sector Activities:

Non-farm credit includes short term financing for livestock, dairy. This includes financing for purchase of feed, raising and, working capital for milk collection, running charges of tube wells etc.

Eligibility

Small groups comprising of 5-10 small farmers of rural areas involved in agriculture, livestock, sericulture, apiculture or other agri related activities and cannot provide any collateral, acceptable to the bank. The eligibility criterion to become a member of small farmer groups is as under;

Crop Sector Activities:

• Individual should be a holder/ tenant/lessee farmers of land up to 12.5 acres (Incase of crop sector) & not to be a defaulter of any bank. 

Non - crop Sector Activities:

• Individual farmers involved in small scale livestock activities like goat & sheep  farming up to 25 animals, meat cattle up to 10 animals and milking animal up to 4 animals   Or
• Not to be defaulter of any bank.

Criteria of selection:

• Debt Burden of each member of the group.(Formal + Informal lending)
• Not more than 02 members in a group should be blood related.
• Each group has their Co-Ordinator.
• The Co-Ordinator must be a notable person of the area bearing sound worth in the area.
• Evaluate the cash flow analysis on group basis as well as on individual basis.
• Verification of each member of community for their individual farming etc by Relationship Manager Agri Or Executive Incharge Agri.

 Critical Success Factors:

1.       Peer pressure of group.

2.       Alleviate poverty like Grameen bank model.

3.       Joint marketing strenght of their produce.

4.       Communitty member will share their machinery/implemnet with each other.

Amount

Maximum financing would not exceed Rs.250,000/- per borrower to meet their financial requirement. The exact amount of loan will be determined by the bank based on genuine requirements and cash flow of the applicant.

Target market & objective:

1.       Farmers having no colleteral to offer to bank.

2.       Small farmers (Self Cultivator) with good reputation.

Geographic Areas

Initially we will start this pilot scheme at the following five districts level branches.

a)      Bahawalnagar

b)      Bahawalpur

c)       Jhang

d)      Sahiwal

e)      Vehari

Security

• Hypothecation of crops/Livestock etc
• Every member has to agree to offer joint guarantee for the bank liabilities of all members of the group and also has to give undertaking to ensure repayments of principal and mark up as per repayment schedule provided by the bank for each of the member.
• Satisfactory cash flows to assess the future repayments of mark up/principal of the loan.
• Two written satisfactory market checking reports.
• Undated Cheque of full marked up amount of finance will be obtained before disbursement.

Insurance

• Crop insurance/Livestock Insurance.
• Life assurance of the borrower (assigned to BOP)

Mark Up

Average 6 months KIBOR+650 bps with the floor of 8.5 % p.a.  

Service Charges

0.5% p.a. on sanctioned amount

Disbursement

The facility will be disbursed through Agriculture Finance Account of the borrower. Uses Purposes, means, repayment capacity of each individual to be thouroughly documented before disbursement.

Tenor of loan:

The tenor of loan will be 10 months from the date of disbursement.

Repayment

• Principal amount will be adjusted along with mark up once a year; however mark up will be recovered on half yearly basis.
• It is the joint responsibility of the group members to ensure timely repayment of principal and mark up of the members.

Renewal

The facility would be renewed upon adjustment of entire principal along with mark up amount for which specific request from borrower will be required. However, fresh documents will be obtained after three years.

Sanctioning powers: