Branchless banking
By combining financial inclusion with the promotion of sustainable agriculture, Hivos partner IDF significantly alters the lives of small producers. Branchless banking is the keyword.
The Initiatives for Development Foundation first links up small producers with a mainstream bank and then promotes sustainable agriculture. IDF uses the Business Correspondent/Business Facilitator model, an Indian adaptation of branchless banking, which enables third parties like IDF to provide banking services to rural clientele. The regular interest rate is applicable, which is collected by IDF and paid to the bank. The bank in turn pays a commission to IDF ranging from 0.5 to 10% of the value of the transaction.
Catalyst
IDF believes that financial inclusion should not be seen as an end in itself, but rather as a catalyst for change. "The main lesson from IDF's experience is the huge potential to significantly alter the lives of small producers by combining financial inclusion through branchless banking with the promotion of sustainable agriculture", explains Ashok Ganguly, Programme Associate, Hivos. "Basically, IDF works on the intersection of credit needs of small producers with their livelihood, where most incoming credit is invested. This leads to a cascading effect on their financial and livelihood situation, which positively affect each other."
Impact
IDF has facilitated loans worth close to Euro 2.7 million to small producers from 475 self-help groups and impacted the agriculture productivity of close to 17,500 small farmers. The farmers have improved their production via modern sustainable agriculture practices in rice and sugar-cane cultivation with 30% yield increase, and by using traditional sustainable farming practices in the cultivation of finger millet with a 25% yield increase. The system of rice intensification has been promoted during weekly farmers' field schools. These village-level schools provide training and follow-up on sustainable agriculture practices.
Scaling up
In February 2011 the state government of Karnataka gave its in-principle approval to IDF to scale up the programme in two districts. The Chief Secretary expressed the government's willingness to synergise its own rural development programmes with the efforts of IDF.
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