Making Agriculture Sustainable and Profitable

About NAFA

Netafim Agricultural Financing Agency Pvt. Ltd (NAFA), a Non-Banking Finance Company (NBFC), is a subsidiary of Netafim Ltd, Israel and a sister concern of Netafim Irrigation India Pvt. Ltd. (NIIPL). Netafim Group addresses 2 major global challenges: Food Security (by promoting Sustainable Agriculture) and Water Scarcity (by helping farmers grow more, with less).

Netafim invented and pioneered the adoption of drip irrigation system across the world. Since the invention, Netafim Group developed many innovative crop based solutions designed to optimize yield in different geographical zones of the globe with the mission to promote a global change, in the way water is used in agriculture, presently is the global leader in promoting micro irrigation products across 110 + countries.

In India, Netafim is present for more than two decades, extending benefits of drip irrigation technology to Indian farmers across the country covering more than 18 lakhs acres of Indian farms while helping more than 8.5 lakhs farmers to reap rich harvests with Netafim’s agro technical guidance. NIIPL is also tied up several State and Central Government authorities to facilitate, administer and monitor various projects (including innovative projects like Ramthal) and subsidy schemes extended by the respective authorities to promote adoption of micro irrigation practices.

As availability of timely finance to farmers has been a major hindrance in adoption of micro-irrigation systems, Netafim decided to extend financing solutions also to the farmers by promoting NAFA, a RBI-registered NBFC, in March’13. Headquartered at Mumbai, NAFA operates at the cusp of 3 major issues faced by Agriculture sector in India:

• Need to develop Climate-Resilient Agriculture, despite increasing Water-Stress
• Need to increase farmers’ income, and
• Need to increase production/ productivity of major crops to help in feeding rising population

Opportunity

India houses 18% of the world’s population on 2.4% of world’s land which has access to only 4% of usable water sources of the world. Niti Ayog report on Composite Water mentions that Delhi & 21 other cities in India would run out of groundwater by 2020, and by 2030, India’s water demand is projected to be twice the available supply, implying severe water stress for hundreds of millions of people. More than 75% of this water is being used in agriculture, therefore the need of the hour is to bring high efficiency of water usage in agriculture & to use it more judiciously for increasing the availability of water for industrial, households & other sectors.

India’s population stands at 1.27 bn and is estimated to rise at a steady pace to reach 1.6 bn by the year 2050 (World Bank estimates). Our food production has increased significantly over the years, still we need to increase it even further in order to meet the ever-growing demand. On the other hand, the land availability for agriculture is reducing due to expanding cities, hence our productivity (production per unit of land) needs to increase even more.

To address this challenge of increasing crop productivity with limited land resource while saving water, the micro irrigation systems (Drip/Sprinkler) will play a key role, shaping the future of Indian agriculture.

As per NABARD study¹, the access to timely finance is one of the major hurdles for farmers in adoption of micro-irrigation systems. As per Government reports² as well as global evaluation studies, the use of micro-irrigation systems has following benefits for farmers: 

• Increased Crop Yield and Quality
• Water Savings
• Energy/ Fuel Savings
• Weed and Disease Reduction
• Labour Cost Savings, by Automation of Operations
• Ease of Fertilizer/Chemicals Application, etc

1. Evaluation study on CSS on Micro Irrigation by NABARD
2. Impact Evaluation study report on National Mission on Micro Irrigation (NMMI) by Planning Commission of India, Task Force report on Micro Irrigation

Out of total 141 mn Ha cultivated agricultural land, total 69.0 mn Ha (49%) needs to be covered under micro-irrigation. The actual coverage, till date, is barely 11 mn Ha (around 15%). Hence, it is a huge opportunity not only to save water by using micro-irrigation systems, but also to enhance crop production/ productivity.

Unique value proposition

NAFA has been focused on financing micro-irrigations systems (drip/ sprinkler) to farmers and also support MSMEs in the value-chain. In line with Netafim’s tag line, NAFA helps farmers to grow more with less (less water, less labor, less fertilizer), making agriculture sustainable and profitable.

NAFA’s entire loan-book qualifies for Priority Sector Lending (PSL) status, for which Reserve Bank of India has given targets to all Banks, basically to ensure flow of credit to high-priority sectors like Agriculture, MSMEs and the weaker sections of society. More than 50% of NAFA’s customers are small & marginal farmers, almost 60% of their portfolio qualifies for lending to weaker sections of the society. NAFA enables the farming community in practicing sustainable agriculture and helps in increasing farmers’ income by providing access to timely and adequate finance.

As per a study conducted by one of big four consulting firm, which included interviewing few farmers financed by NAFA, the adoption of micro-irrigation system has impacted farmer’s lives in following manner:

• Most farmers have shifted to cash-crops like Banana, Pomegranate and Turmeric which improved their income
• More than 80% farmers have experienced reduction in required fertilizer quantity (thereby lower cost)
• More than 60% farmers have experienced reduction in labour efforts/ cost
• Crop yields have increased significantly between 25%-90% for crops like Cotton, Sugarcane, Sweet lemon, Tur
• For 15% farmers, income was doubled, while more than 70% farmers observed an increase in income by more than 20%
• More than 63% farmers would not have bought drip-irrigation system if finance was not available, and remaining 37% would have bought a low quality system or would have delayed the purchase
• With increased income, these farmers have not only invested in better healthcare, education, and lifestyle for their families, but have also improved their farm-infrastructure and purchased assets like land, property and vehicles.

Our approach

For serving farmers, NAFA has taken a Phy-gital approach, a mix of physical as well as digital tools.

Physically served through 500+ exclusive channel partners of their sister-concern Netafim Irrigation India Private Limited (NIIPL) across 8 states & 100+ districts.

And Digital touchpoints through Mobile Apps, built in-house, to service the customers. The field-staff carries smartphones while visiting customers and can access real-time information pertaining to their accounts, which can also be shared with farmers digitally.

Our achievements

During last 7 years of NAFA’s journey,

• Cumulatively disbursed more than INR 950 cr of loans
• Touched lives of more than 50,000 farmers.
• Directly supported more than 10,000 farmers in providing customized financing solutions for adopting drip irrigation practices
• Enabled adoption of micro-irrigation systems on 60,000 hectares of land.
• Worked with farmers in water-deficit states like Maharashtra, Karnataka, Chhattisgarh, Madhya Pradesh, Tamil Nadu, Kerala & Gujarat
• Supported Government’s initiative of increasing area covered under drip irrigation by about 150,000 acres (60,000 hectares)
• Worked closely with 40 sugar mills across Maharashtra & Karnataka in facilitating more than 5,000 sugarcane farmers for getting drip irrigation systems installed by providing customized financing solutions
• Singular focus on providing financing solutions to farmers for adopting drip irrigation system

Business update

During last 5 years of operations, our loans book has grown at 33% CAGR to INR 275 Cr. In these 5 years, the financial services industry faced challenging times in form of NBFC crisis, wherein big, high-rated NBFCs suffered, and now the COVID-19 crisis, which has caused global economic downturn. However, NAFA has been able to successfully tide-over these challenges within its infancy and has continued to honour all its obligations. With support of our parent Netafim, we believe will be able to sail through this phase and will continue to have enough liquidity to keep growing.

Future plans

In first phase of growth, NAFA has been providing customized financial solutions to farmers/MSMEs in micro-irrigation value chain, within the Netafim India’s ecosystem.

Considering various other unfulfilled financial needs of farmers/MSMEs, in agri & allied activities, NAFA aims to enhance and diversify its product-offerings, especially around automation/ mechanization of agri & allied activities.

As we alone cannot cater to all their financial needs, we are also looking for mutually beneficial partnerships with other financial institutions. This will help NAFA in leveraging our experience and rural reach; and will benefit the financial institution in better distribution and high PSL achievement.

We believe

COVID-19 crisis has demonstrated that everything else can stop but Agriculture must go on. Without ample supplies of groceries, fruits, vegetables and milk etc, it will be impossible to enforce lockdown. Restrictions in transportation have also resulted in direct connect between farmers and urban consumers, many apartments/ societies have established direct connect with Farmers/ FPOs supplying these essentials.

Agriculture has always been full of uncertainties, and climate-change is adding more complexities to it, by uneven distribution of rainfall, draughts, floods and resultant water-stress. Farmers are bearing the brunt of these difficulties and are finding it difficult to manage their crops. Challenge is to make Agriculture climate-resilient and profitable.

Climate-resilient, water-efficient and less labour-intensive agriculture being the need of the hour, NAFA aims to help the farmers in adopting relevant latest technologies and mechanization. While most financial institutions focus on providing only working capital to farmers, our objective is to support the much needed capital expenditure and automation.