Financing Climate-Smart Agriculture: a case study from the Indo-Gangetic Plains

Abstract

The Indo-Gangetic Plains represents one of South Asia’s most productive agricultural regions, yet it is highly vulnerable to climate change and requires the widespread adoption of Climate-Smart Agriculture. Although farmers understand the benefits of such technologies, financial constraints often undermine adoption. Using a case study from Haryana, we assess the opportunities and challenges aligned with the different pathways available for farmers to adopt and finance two capital-intensive technologies: laser land levelers and happy seeders. Our analysis uses unique data from Karnal, where stakeholders have partnered in Climate-Smart-Villages, and combines a household survey from 120 farmers, interviews, and focus group discussions with banks and cooperatives. Our results indicate adoption rates of 77% for laser land levelers and 52% for happy seeders, with only 7% and 21% of farmers owning the technologies, respectively. Hiring is highly preferred over purchase, mainly due to the flourishing of Custom-Hiring Centers, which are vital in driving large-scale implementation. We find that farmers prefer funding from family, savings, and moneylenders (indirect pathways) rather than from commercial banks (direct pathways) to get immediate access to credit and avoid bureaucratic procedures. Our study offers broader insights into the state of agricultural finance in India and adaptation to climate change and reveals that institutional innovations can enhance the financing of CSA technologies for smallholder farmers. Our findings have important implications for decision-makers seeking to streamline credit access for CSA machinery rental. Future research should focus on the efficacy of different finance channels and their causal impact on pathways for technology adoption.