Is the resistance amongst banking license aspirants to “Go Rural” due to Lack of Suitable Business Model?

Sustainable Agriculture, MSME & Green Value Chain Finance | Priority Sector Finance | Manoj Rawat, ValueFin India

Is the resistance amongst banking license aspirants to “Go Rural” due to Lack of Suitable Business Model?

Is the resistance amongst banking license aspirants to “Go Rural” due to Lack of Suitable Business Model?

“Let us not be the prisoner of past. Think Beyond. Go to “Bharat” which is ready to offer a business model which is much bigger than our imagination and more profitable than our projections.”

A widely prevailing resistance among financial institutions and banking license aspirants to go Rural  India (“Bharat”) , undertake Priority Sector lending and Focus on inclusion primarily seems to be on account of  Lack of a business model that is viable, sustainable, robust and an create value to stakeholders.

Can we have business model which addresses the requirements of “Go Rural, Go Inclusive” and churns good returns for stakeholders? Yes, we surely have. Unfortunately we are restricting ourselves with limited options as we trying to extrapolate from the past when bright new opportunities are emerging on the horizon. It’s important to draw lessons but not to the extent we freeze the business model.

We need to recognize Rural Business, Agriculture Business, Food Security, Financial Inclusion are serious opportunities which are all intertwined and complimentary supports for developing a robust Rural Business model. These areas are “intertwined”  with  the “next phase of economic growth” of the India which we all aspire for, that which will be which lot more participative, broad based  & inclusive and can be become real engine which will propel country into next  growth trajectory. The basket of products that the Rural India needs will be far more wholesome than in Urban India. The various segments which are going to see the next big growth opportunity include Agribusiness,  MSME, Housing, Vehicles, Services, Education, Infrastructure, Manufacturing, Energy and so on. The 30 Million MSMEs primarily in Rural, outskirts of Urban areas offer another big opportunity. The units most are unorganized and offer huge potential to grow and offer business opportunities.

We recognize India is an agrarian economy and there is an oft quoted fact that share of agriculture in GDP is < 14% and it’s diminishing. However it’s a bit misleading as we have missed the value addition which is happening to this segment and makes it much more critical. More important is the fact that we need highlight that contribution from Rural India to the GDP of country is 50% (with 70% population contributing)  it is bound to go up significantly the way Rural India is seeing comparatively faster growth. It is expected that the scale will soon tilt in favor of Rural India


1.Agriculture and Rural business to take India to next trajectory of Growth

With the mounting pressure of a growing population, the change in food consumption patterns,  the need for higher productivity per unit of input, demand of value added products, ensuring the educated youth could be retained in agriculture and above all the need to ensure food security of the country, Agribusiness is now being seen as next big opportunity and the growth engine of future  by the entrepreneurs, corporate houses, banks and financial institutions. Agribusiness can empower India emerge as “Global Agricultural Super Power”

Although the agriculture growth rate and per unit productivity remains a big challenge and big area of concern, the country is steadily emerging as agricultural power.  India’s food security will depend on increased crop productivity, higher milk yield, increase its production of grains, fruits and vegetables, reduction in food wastage, managing land and water resources optimally and developing a robust agri-marketing and logistics infrastructure and enabling policies for capital investment in this sector. This is critical to meet the demand of a growing population, to provide optimal nutrition to a large segment of society and to become a global food hub. To do so, a highly productive, competitive and sustainable agricultural sector will need to emerge at an accelerated pace and there needs to be a shift from ”agriculture” to “agribusiness” to revitalize the agriculture segment and achieve the 4 to 8 % growth rate on Y-O-Y basis.  Besides the Growth of MSME, Services

2. Innovation, outreach, enabling value chains and upgrading skills

For Corporate houses, banks and financial institutions, it calls for designing innovative schemes, develop new products, increasing outreach through expansion of institutional framework and understanding and developing suitable offering for various Agri-value chains, agri-logistics, MSME,  Micro banking, manufacturing, handicraft, small housing besides investment in technology and upgrading skills and above all attract & retain educated youth in Rural India.

A sound financial inclusion policy primarily needs to focus on increasing productivity, viability and bringing lasting improvement in the economic condition of the small, marginal, tenant farmers and sharecroppers, wagers, artisans, factory workers. The significant improvement in income levels and minimum support prices make them a huge bankable customer base.

3. Retail agribusiness, MSME and Priority Sector credit potential

The regulatory norms have been designed to promote direct lending to the farming community. While this policy shift has thrown open a challenge to provide agri-banking services directly to large number of farmers spread across 600,000 villages, it also provides an opportunity to tap a huge retail, MSME, housing, education and agribusiness potential in rural areas.  This is also an opportunity to plough in capital investment in agriculture and allied areas that remains key to growth of  economy on a sustainable basis. This can be enabled by addressing the capital needs from Farm to Firm, Pre-harvest credit to Post harvest Management, Infusing capital for short term purpose and long term infrastructure.

The need to move away from “obligatory attitude” to seeing the “Go Rural” as next big opportunity that can also churn value for stakeholders. I reiterate do not extrapolate the past when unlimited opportunities are emerging on the horizon.

Manoj Rawat

The views expressed in this article are purely personal.

Email: mkrawat@gmail.com

LinkedIn : http://in.linkedin.com/in/mkrawat

4 Responses

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