This initiative in agriculture sounds like a good idea, clearing of large tracts of agricultural land for rural farmers to make it available in commercially viable plots, along with inputs and small equipment. Big machines would also be made available for a fee to support mechanised farming. The farmer will be required to pay back the cost of input and a small fee as land rent but only after the harvest. Support with agric extension services as one of the safe guards against crop failure is also key to this idea. And insurance should be integrated as a component part of providing finance. In anticipation of successful harvests, markets should be secured and small agribusinesses established through cooperatives so that beneficiaries will have some control over preservation/processing and packaging of their crops, increasing the value before it goes to the market. Important considerations for establishing a programme such as is proposed above would include
Ensuring that the scheme appropriately targets rural dwellers and low income earners
Ensuring long term commitment of potential beneficiaries
Involving, medium to large scale entrepreneurs at an appropriate level to ensure commercial viability of the programme
These considerations pose a challenge for income generation that might be addressed by adopting a long-term and strategic approach, including establishing a strong governance and administrative framework for the programme to foster autonomy and accountability.
Financial considerations to ensure income generation and sustainability
To increase chances of success, such a programme should adopt appropriate market principles by putting together parcels of commercially viable plots and providing high quality but low priced agric extension and other support services to beneficiaries.
It will be important to state explicitly and insist (in implementation) that all products and services offered by programme should be provided on a commercial basis and must be paid for even if payment by beneficiary is deferred. It must also be stressed that all beneficiaries of deferred payment must be able to demonstrate commitment in advance of participation and mechanisms put in place for redeeming failed commitments.
In line with this the advice is that
Plots must be given out on a lease agreement and rents (fixed according to amortised cost of land preparation) collected at pre determined and agreed intervals
Farming loans when accessed through the project should have a service charge to cover administrative costs. This service charge might be paid after harvest of crops
Agric Extension services must be priced realistically and a service charge appended. Like the admin charge for loans accessed through the programme, payment of this charge can be deferred (or subsidised through a grant)
Other charges attendant to farm holdings (security etc) must also be worked out and paid for on the same premise as in 3
State taxes must be redeemed at harvest time
Fines for defaulting beneficiaries should also be worked out in advance based on back up service costs for farming operation provided by estate manager and must be redeemed at harvest
People who are unable to make farming their primary occupation might be able to benefit by sponsoring a beneficiary. This can be done through
private arrangements – (e.g. politicians can put their money where their mouths are by sponsoring their nominees directly)
arrangements with programme (in liaison with participating banks, commercial papers can be offered to potential investors)
The crucial factor of course is the ability to establish an effective super efficient management and administrative system that is open to probity. Only on this premise can the option in 7 might even be remotely considered. Arrangements can be made for the institution established to manage the programme to have access to an expanded funding pool through the involvement of investors that will enable increased participation by target beneficiaries
Another critical factor is access to markets to ensure completion of the value chain and closure of the cycle. At present, there is a dearth of agribusinesses involved in even the most basic processing. Existing businesses emphasise export of raw materials because of a lack of technology and limited capital to buy equipment. This compounds the risk to investments in the programme and strategies for addressing it should be built into programme design
The devil, as with programmes of this nature is definitely in the details. There would be so many ends to tie up and keep a watch on but it would provide opportunities for productive public/privates partnerships and promote banking and uptake of insurance by rural dwellers. Its strength is in its complexity.