To run an agricultural business or rather run farming as a business, you definitely need finance. Agriculture is a capital extensive business with 30-70% capital requirement. Moreover, to get substantial gain in farming, one need to do it in large acreages. Therefore the need of capital is inevitable.
There are numerous institutions that offer finance to farmers. There institutions lend money to be repaid in installment or in lump sum after harvesting. It all depends in the duration of maturity of the crop or animal and the time it takes to get into the market.
The most common financing institutions are:
- Micro Finance Institutions
- SACCO (Savings and Credit Cooperative Societies)
- Government programs.
The institutions have developed products and programs tailored towards providing financial solutions for farmers. Though the institutions prefer to finance crops that have less maturity duration, some large scale farmers are able to access financing to crops that go even beyond one year.
Financing of small scale farmers have been a challenges for financial institutions but now with micro finance and their group financing model, it now becoming a reality.