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Assam AgriFin – Xamahar challenge fund: Last date to apply is 4th February


In India, agriculture contributes to 15.4% of the overall GDP and employs more than 45% of the population[1]. Yet, despite witnessing a drop in hunger rates over the years through adoption of modern agriculture practices, as a country we have not achieved better food availability and better nutrition. Prevailing gender gap and low profitability have been the root cause for most problems in the agriculture sector.

The State of Assam is also facing many challenges in the agriculture sector even after offering a plethora of opportunities, such as higher soil fertility, favourable climatic conditions, rich biodiversity and more. All that’s needed to tap into this pool of opportunity is institutional credit.

The financial sector of the State has a large unmet demand of agriculture credit for the stakeholders in the value chain. At present, the share of the agriculture sector in the total credit portfolio of the banking sector stands at only 22% though with a relatively high gross non-performing loan ratio of 8%1. This highlights that there is a significant unmet credit demand, particularly for crop loans which form the bulk of the credit demand that the financial sector can cater to with new and innovative financial products.

Reports by NABARD and The State Level Bankers’ Committee (SLBC) have observed that 18 out of 33 districts in the State of Assam have less than 50% of supply of agriculture credit. The State has been performing below the national average of Credit Deposit (CD) ratio of 90% with an overall CD ratio of 44.3%[2]. To enhance agricultural credit, the Government of Assam has taken various efforts for promoting financial inclusion in the sector through implementation of central sector schemes, banking initiatives, and venture capital funding.

The government has been instrumental in successfully delivering initiatives including Pradhan Mantri Fasal Bima Yojana, Weather-based Crop Insurance Scheme, Interest Subvention for Providing Short-Term Credit to Farmers (via Banks), Soil Health Cards, equity, grant in aid and subsidy support to agribusiness and agritech companies.

While several measures are taken for financial inclusion, some hindrances for adoption of the financial inclusion programmes linger on, including issues regarding scalability of agribusiness initiatives due to the influence of external factors such as weather, water availability and land topography varying from region to region, higher transaction costs in financial products (small size of seasonal credit, wide geographical spread and lack of communication infrastructure), unawareness among the farmers/customers, lack of financial literacy and geographical limitations amongst others. 

To improve the financial uptake, Assam Agribusiness and Rural Transformation Project (APART) has started a challenge fund called Assam AgriFin – Xamahar. It aims to transform the agriculture sector in the State of Assam and offer opportunities to many companies and farmers for a bright and prosperous future.

Why a challenge fund?

Providing financial access to stakeholders in the agriculture value chain is critical to uplift the economic conditions of farmers and creating a challenge fund is the right way to do it. A challenge fund, sponsored by donor organizations, is a competitive financing facility encouraging private sector organizations to contribute to development and poverty alleviation. 

How does a challenge fund work?

The funding agency invites project proposals from private companies and assesses them against a transparent and predetermined criterion to shortlist a set of sub-projects depending on the grant amount. The amount of support varies from providing outright grants, technical support to repayable loans depending on the project design. In today’s scenario, where the focus is shifting to providing targeted and localized solutions, a challenge fund has become an integral tool for development and has been adopted by multiple countries to promote and scale up innovation. 

Successful challenge fund in other countries

The Sakchyam Challenge Fund in Nepal was successfully implemented to improve the access of financial services across poor and middle income groups with an outlay of £15 Million between 2014 and 2021. Other challenge funds introduced in the global arena include the Malawi Innovation Challenge Fund, Africa Enterprise Challenge Fund and AgriFIKenya Challenge Fund (2018 – 2022). A challenge fund initiative seeks to unlock potential solutions to entrenched problems and hence, it can be a unique option for enhancing the accessibility of financial services in the agriculture sector. 

Challenge fund in Assam

Assam is one of the pioneer States in India to implement the concept of a challenge fund aimed at alleviating issues at the grassroot level by identifying solutions to enhance investments and productivity in the agriculture sector. The challenge fund is in alignment with the Central Government objectives of increasing flow of agriculture credit in the current Budget 2021. The Finance Minister in her Budget speech emphasized that the central government will focus on ensuring increased credit flows to agriculture and allied sectors – animal husbandry, dairy and fisheries and Assam AgriFin – Xamahar is a positive step from the State government to help build a distributed infrastructure and focus on overall development of the sector.

Benefits of a challenge fund

The proposed challenge fund, Assam AgriFin – Xamahar, introduced by the State is designed to support innovative approaches to deliver financial services at scale for stakeholders including farmers, FIGs, FPOs, FPG and SMEs within the agriculture value chain in targeted districts of Assam. Financial service providers/value chain financiers can partner with vibrant start-ups or agri-fintech companies to introduce new concepts to tackle the issues affecting the agriculture sector in the State. The fund is slated to achieve financial inclusion among the agriculture stakeholders in the State and realise the PM’s vision of doubling farmers income by 2022. 

  • Provision of grant in access of Rs. 5 crores
  • Opportunity for select 8-12 subprojects to tap into new territories and expand business in Northeast region
  • Any 2-year old company with positive tangible worth can apply for the grant
  • 2 stage selection process to identify innovations that have potential for scaling
  • Will help to speed up the agriculture sector’s progress and improve farmer’s financial access to farmers
  • A chance for small enterprises or start-ups in finance sector to scale up business in a short span
  • Benefits local or regional businesses that need capital

Implementation is the key

The success of the of the Assam AgriFin – Xamahar challenge fund can be a game changer for the agriculture sector not just in Assam, as it could pave way for more start-ups to flourish and provide financial access through innovative ideas to all categories of farmers – tenants, sharecroppers and oral lessees across states. The project team will ensure selection of relevant ideas pertinent to the financial landscape of the State, fair pre-determined evaluation criteria, balanced governance structure, monitoring of the on-ground implementation of these ideas and updating based on timely feedback from the stakeholders. Thus, the successful implementation of the fund will create a stronger interest from various international donor agencies which have implemented similar initiatives in other parts of the world. Such sources of funding and their implementation at scale will aid in reducing the budgetary deficit in the years to come. 

If your company is interested in applying for Assam AgriFin – Xamahar challenge fund, visit (https://assam-agrifin.in) and register. The last date of application and concept note submission is 4th February, 2022.

For further information, you may email at xamahar@assam-agrifin.in, or call us:+91 361 2332125.

[1] Source: RBI Handbook of Statistics, 2019-20

[2] https://www.nabard.org/info-centre-state-focus-papers.aspx?cid=512&id=698 and Source: SLBC Assam, March 2020

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