As part of a multi-year program with researchers from the International Food Policy Research Institute (IFPRI), Dr. Patrick Ward, associate professor of Food and Resource Economics at UF, and his collaborators are looking at ways to increase prosperity in India and other developing countries by examining options for alternative rural credit systems.
Located in the eastern part of India, Odisha is the country’s 8th largest state and produces 9% of the total rice in India. While the production of rice and other grains is one of the main contributors to the economy in Odisha, many farmers in the region, as well as in other developing countries, struggle with limited access to funds. This lack of liquidity prevents them from acquiring the necessary inputs and other resources to enhance agricultural productivity and profitability.
In addition, traditional rural credit markets can often be hard to access for those without enough assets to leverage for collateral.
To address these issues, the IFPRI researchers and Dr. Ward are conducting a pilot study on implementing a new lending model that facilitates loans on the basis of a novel credit scoring methodology known as a KhetScore. These scores are determined through real-time crop monitoring systems, which provide plot-level agricultural assessments. By leveraging this approach, loans become more accessible to farmers, enabling them to access the resources required for economic prosperity.
“Because the KhetScore methodology relies on emergent technologies like remote imaging and machine learning, there is massive potential for relatively low-cost scaling of this approach,” Ward said.
Currently, IFPRI researchers are further exploring the impacts of offering loans based on KhetScore in conjunction with crop insurance in Odisha and in the state of Maharashtra in western India.
While these policies are meant to help farmers throughout the region at large, particular attention was paid to how the innovative lending system may promote gender equity and increased access for women farmers.
“The KhetScore methodology is agnostic when it comes to gender, so has great potential to greatly expand women farmers’ access to formal sources of credit by basing creditworthiness on yield and profit potential,” Ward said. “Our hope with this research is that this innovative credit-scoring methodology can have transformative impacts on the rural financial sector by enhancing credit access among smallholders and landless farmers. Examining these impacts along gender dimensions is especially important since women farmers often lack collateral or documented land rights that would enable them to avail credit from other commercial lenders.”
In the case of Odisha, cultivating rice is viewed as risky due to the reliance on rainfed agriculture and the unpredictability of monsoon rainfall. Even with increased access to credit, some farmers may still be concerned about the potential loss of collateral they may face if their crop is wiped out or if they are otherwise unable to repay their loans.
In a recently published study by the IFPRI research team and Dr. Ward, a survey was done of 900 men and women farmers in the Odisha region to understand better the additional challenges women farmers may have with labor access and costs. Results showed that women farmers often struggled to find timely labor, paid more for it, and had to plant later in the season as a result, which increases the risks associated with rice cultivation in the rainfed region.
One potential way to reduce this risk could be using an alternative planting method called direct-seeded rice that could mitigate risk. As a part of the same project exploring gendered differences in labor access, the differences in potential yield based on planting method were also explored.
“We were interested in exploring whether other methods of rice cultivation — and especially alternative means of crop establishment — might lower the risk of rice cultivation such that insurance providers might be willing to offer insurance at a lower cost if farmers practice these less risky methods,” Ward said.
By modeling yields for two types of planting methods, transplanting vs. direct seeded, it was shown that direct seeded had higher yields when planted after June 1 than the traditional planting method of transplantation, which could be especially beneficial to women farmers as they often must plant later in the season, and it is suggested anecdotally that it may decrease labor costs as well.
More information on the project results so far can be found here: https://ebrary.ifpri.org/utils/getfile/collection/p15738coll2/id/136692/filename/136904.pdf