Updated: August 24, 2021 6:54:11 pm
A pilot project in the use of blockchain technology by the Maharashtra State Warehousing Corporation (MSWC) has helped many farmers access commodity finance faster and will be upscaled this season.
Blockchain is a ledger technology that allows data storage in many servers in a decentralised manner, which is viewed nearly in real-time by anyone with access. With blockchain technology, farmers can access loans against their commodities within 24 hours instead of the current seven days.
Commodity finance are loans extended by financial institutions against agricultural produce. Loans can be availed on the produce of warehouse receipts, which are given to farmers or traders from accredited warehouses. The concept is meant to help farmers get better price for their produce and prevent distress sales at low prices.
Senior bureaucrat Deepak Taware, who is heading the MSWC, said warehouse receipts have been promoted by both the central and state government. “At the start of the harvest season, farmers are hard pressed for money and are often forced to sell their produce at lower prices. Prices take a beating as supply outstrips demand in the market,” he said. Instead of offloading their entire produce in one go, farmers can do better if they stagger their sales. Warehouse receipts can be used to help stop this.
However, the process of commodity finance is both time consuming and convoluted, according to experts. Farmers bring their produce to the warehouse, after which receipts are generated. The physical receipts are then taken to the bank, which issues loans after verifying the stock. All this takes at least seven to 15 days, which defeats the whole purpose of the scheme, experts said.
Blockchain will help cut down this time, Taware said.
The MSWC has entered into a special agreement with the Maharashtra State Cooperative Bank (MSC) bank for this scheme. Using the technology developed by WHRRL Solutions, a start-up, MSWC has linked 203 of its warehouses where receipts can be issued immediately. The platform can also be accessed by the bank and the entire transaction can be finished in 24 hours, Taware said. Given that banks get to know in real-time when receipts are issued, they call up farmers to upsell their commodity finance scheme, he added.
At least 185 farmers had participated in the pilot project in the 2020-21 fiscal and the total quantum of loans extended was Rs 3.63 crore. In this fiscal, 423 farmers have already availed of the receipt and Rs 9.75 crore worth of loans have been issued.
The project will be further upscaled this season to bring the benefits of this technology to more farmers.
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