Are you a producer? Looking for a business loan? Find here a detailed guide on how to apply for the NABARD loan through the producer company loan scheme.
Producer companies in India can get financial assistance from NABARD (National Bank for Agricultural and Rural Development). NABARD has created a separate Fund titled “Producers Organization Development Fund (PODF)” with an initial corpus of Rs. 50 crore. Basically, the fund is in operational mode since 2011. NABARD provides producer company loan to support the entire farmers’ community of our country.
India has over 12.5 crore farmer households of which over 85% are small and marginal farmers with landholdings of less than 2 hectares. The average size of landholding is 1.33 hectares/ farmer households.
Due to this fragmentation and disorganization, it is not economically viable for the farmers to adopt the latest technology or to use high yielding varieties of inputs like seeds and fertilizers. They are also unable to realize good value from their marketable surplus by individually selling their produce.
On the other hand in the case of off-farm sector activities, handloom weavers & artisans are not able to compete with their products in the market due to poor quality & obsolete designs.
Through the better organization, producers can utilize scale to procure inputs at a lower price, and gain more selling power for their produce/product. Forming a producer organization can also provide access to timely and adequate finance, help in building capacity, and provide linkages to markets.
Organizations Eligible for NABARD Producer Company Loan
- It is formed by a group of producers for either farm or off-farm activities
- A registered body and a legal entity
- Producers are shareholders in the organization
- It deals with business activities related to the primary produce/product
- It works for the benefit of the member producers
- Portions of profit are shared amongst the producers and the balance goes to the share capital or reserves.
The Objective of NABARD Producer Company Loan Fund
Producers Organization Development Fund (PODF) is used to support Producers Organizations across three levels. These are credit support, capacity building & market linkage. The objective of the Fund is to meet end to end requirements of producers organizations as well as to ensure their sustainability & economic viability.
Generally, if you have a project with a duration time of 7 years, you can apply for this loan. Items eligible for assistance broadly include the cost of building, machinery, equipment, specially designed vehicles for transportation, etc. Also, it includes working capital requirements, including administrative and other recurring costs connected with the project as a composite loan.
Basically, NABARD’s assistance is limited to a maximum of 90% of the total project outlay. However, the quantum of assistance and the Organization’s contribution may vary from project to project depending on the project size, outlay, means of financing, and the resource support available from various agencies/sources, etc.
Eligible Activities for NABARD Producer Company Loan Fund
A producer company can apply for this loan for several purposes. Broadly, it includes financial, capacity building, market linkages, etc.
In the financial segment, producer companies are eligible for different types of loans. These are
- Direct lending to Producers Organization for term loans or
- Composite loans comprising of both working capital and term loan requirements, or
- Working Capital as a composite loan
- Subordinated Debt as tier II capital based on the requirements of the PO and provided the Memorandum and Articles of Association/bye-laws permit them to accept such a debt.
Broadly, the capacity building covers any activity relating to the functioning of a producer organization. These are
- Skill development in both farm and off-farm sectors
- Business planning
- Technological extension through classroom training
- Exposure visits, agricultural university tie-ups, expert meetings, etc.
- Any other capacity-building initiative which directly benefits the producers’ organization.
In the market linkage segment, you can avail loans for the following purposes.
- Credit and/or grant support for setting up of marketing infrastructure facilities for the sale of produce
- Support could even be on the lines of rural Haat and rural mart if the situation so desires or it could be structured differently based on the need
- NABARD will explore tie-ups with buyers for the produce of Producers Organizations
- NABARD shall help form partnerships between Producers Organizations and local and large companies
- Through existing schemes of MoRD and NHM, NABARD will promote the creation of infrastructure wherever possible.
How to Apply for NABARD Producer Company Loan Fund
Basically, the Producers Organizations/ NGOs eligible to avail assistance (loan & grant) under this scheme. You have to submit a concept note indicating the brief details of the organization & the proposal. NABARD HO/RO will approve the proposal.
After approval, you have to submit the Detailed Project Report along with all the required statements. Also, you can submit the concept note online. You can check the NABARD producer company loan manual Here.