P2P Crowdfunding: An Alternative Source of Credit for Enhancing the Financial Inclusion of Small Holder Farmers

Abstract

Background: Indian agriculture is considered as a major source of livelihood generation for more than 58 percent of rural households. Credit is a pivotal element both in agricultural production and marketing system. Presently, most of the marginal and small farmers solely depend on localized lending models viz., village money-lenders who lend money to farmers for short term. The ministry of agriculture estimates that to double farmers’ income, private investment in agriculture must increase to two-fold. P2P crowdfunding is gaining grip at a very fast pace and gradually becoming an attractive investment option for investors. Methods: This paper attempts to explore different aspects of P2P crowdfunding and its scope as an alternate source of credit for the small and marginal farmers. Based on secondary data analysis (2014-2022) from a number of research papers, RBI notifications, blogs and newspaper articles. Results: It is evident that the global peer to peer (P2P) lending market size was valued at $67.93 billion in 2019, and is projected to reach $558.91 billion by 2027, growing at a CAGR of 29.7% from 2020 to 2027. This type of funding option has tremendous potential to magnify agriculture capital markets by allowing agricultural firms to build value more efficiently and involve more people directly in food production. The paper distinguishes the advantages of P2P lending over traditional credit system and private lending that are predominant in agriculture. However, P2P lending has its own limitations that is also discussed. Additionally, companies as well as investors need to analyse crowdfunding options carefully as per its economic feasibility and structure so that it will lead to mutually beneficial investment relationships.