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Assam's ‘Xamahar’ Project Wraps Up Transforming Agri-Finance Access And Empowering Farmers

Priyanka Chakrabarty , October 30, 2024
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Guwahati: Xamahar, a project intended to partner with financial service providers to enhance access to financial services such as savings, payments, insurance, and credit for beneficiaries in the agribusiness sector has finally come to an end in September 2024. Launched in December 2021, the project, officially known as the Assam AgriFin Xamahar, was a component of the Assam Agribusiness and Rural Transformation Project (APART), supported by the World Bank. It functioned as a competitive funding mechanism aimed at fostering innovative approaches to deliver financial services at scale for farmers in key agricultural value chains in Assam. 

A report evaluating the impact of the project is expected to be published, potentially in late 2024 or early 2025. This report will likely provide insights into how well the project achieved its goals, challenges faced, and any future directions for similar initiatives in Assam’s agriculture sector. The project was planned to support 8 to 12 sub-projects, directly benefiting approximately 125,000 individuals, with a focus on ensuring that 30 percent of the beneficiaries were women.

“The ‘Assam Challenge Fund for Innovative Finance in Agriculture (ACFIFA)’ coined as ‘Xamahar’ program was established to support proven innovations by financial service providers, including banks, microfinance institutions (MFIs), value chain financiers, insurance companies, and payment service providers,” ARIAS society officials told Business North East.

The aim is to enhance access to financial services such as savings, insurance, payments, and affordable and timely credit for farmers/FIGs/FPCs and enterprises involved in agricultural value chains in Assam.

One of the most significant challenges faced by Assam’s agricultural sector is the lack of integration across various stages of the value chain. Farmers often struggle to secure direct access to finance and markets, leading to inefficiencies in pricing and operations, as well as considerable post-harvest losses. Insights from Xamahar highlight the importance of utilizing knowledge and technology to address these issues through enhanced ‘access to finance’ and the ‘responsible use of finance.’

This initiative has thoughtfully identified and targets specific problem statements in the agricultural sector:

a) Insufficient Access to Credit: Organizations such as Samunnati Financial Intermediation Services, Rangde, and FWWB are transforming the lending landscape by offering affordable loans based on non-traditional credit scoring methods. They are assessing the unique business models and repayment capacities of first-time borrowers, small farmers, and Farmer Producer Organizations (FPOs). For instance, entities like Dehaat facilitating invoice financing credit through public sector banks by establishing Credit Guarantee Funds. ESAF Small finance bank focusing on working capital loans for FIGs/FPCs. With increased working capital support, farmers and FPCs now find it easier to procure better inputs, thereby improving their operational efficiency and productivity. The enhanced recovery of loans and risk assessments is also creating a robust pool of verified user data for banks to underwrite future loans.

b) Limited Insurance Penetration: Traditional insurers often hesitate to promote farm insurance products due to concerns about high claim rates. Under Xamahar, organizations like Dehaat and the ECSO Global & Digisafe consortium are leading the way in developing data-driven parametric insurance models to improve insurance accessibility. These initiatives leverage technology and data analytics to make insurance more relevant to farmers, thus mitigating risks and enhancing resilience within the agricultural sector. 

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The ECSO Global & Digisafe Insurance Consortium has introduced parametric fishery insurance in Assam for the first time, protecting livelihoods from adverse environmental impacts. 
Dehaat has also initiated seed germination (parametric) insurance thereby boosting resilience against crop failures. 

The National Insurance VimoSEWA program has significantly improved access to micro-insurance, providing vital support to farmers’ households by addressing risks related to hospitalization-induced wage losses. Since its launch, Vimosewa has successfully resolved several claims, underscoring its effectiveness in safeguarding the financial stability of vulnerable communities. Farmers are now empowered to protect their livelihoods against unforeseen challenges, thereby strengthening the entire value chain.

c) Underdeveloped Marketing Channels: Collaborations with organizations like Kalgudi Digital and Dehaat are facilitating digital market linkages. Through these digital platforms, farmers can gain visibility and access to a wider market, overcoming geographical barriers and broadening their growth opportunities. 
Companies like Siddhi Vinayak Agro offer guidance on potato cultivation, enabling farmers to succeed in competitive markets. They also provide high-yield variety (HYV) seeds with a buyback guarantee at the best market price while assisting in offsetting outstanding credit with Rangde (a consortium partner) against sales. 

Kalgudi and Dehaat are committed to ensuring access to quality inputs at competitive prices. Training and expert consulting on farming best practices are leading to reduced production costs and improved yields. Collectively, these initiatives aim to enhance market transparency by connecting farmers directly with buyers, lowering transportation costs, and decreasing reliance on traditional middlemen.

d) Low Farm Mechanization: Startups like Integra offers lending solutions for drip irrigation and other equipment financing, addressing the challenge of low farm mechanization.
Additionally, banks and business correspondent organizations such as ESAF and FIA provide easy access to government-sponsored social security schemes and banking services directly at the farm gate.

e) Digitization: Organizations such as Sammunati Consortium, Dehaat, VimoSEWA, RangDe Consortium, FIA, ESAF SFB, MBS etc offering digitization of financial services by reducing physical intervention along with easy disbursement with minimum documentation within 7 to 14 days.

From its inception, the project has disbursed loans totaling Rs. 70.5 crores, benefiting over 62000 beneficiaries, with 47% of them being women, highlighting the project's commitment to gender inclusivity.

f) Sustainability: At the sub-project level, most initiatives, except for FIA, ESAF, and GoGreen, have either met or exceeded their targets. However, credit access remains a challenge due to the poor CIBIL scores of beneficiaries. Among the ten sub-projects, five—RangDe, Samunnati, Vimo Sewa, ECSO, and DeHaat—have performed well with innovative models. 

Notably, Samunnati, DeHaat, and SV Agri (a consortium partner of RangDe) will continue operations post-project closure, ensuring ongoing benefits for farmers in Assam. ESAF SFB, FIA, and Integra, despite not achieving their KPIs, also plan to maintain their presence. This continued commitment from these organizations underscores the success of the project in enhancing agri-value chain financing in Assam, even with its short duration and abrupt conclusion.

The Xamahar project has been successful in unlocking the agricultural value chain's full potential and promoting sustainable growth in the sector. Through training and support, farmers were able to effectively navigate financial pressures, market fluctuations, and storage challenges. It is clear that such collaboration, innovation, and technology will ensure farmer welfare and food security for the nation.