Effectiveness of FPOs: Credit Performance Evaluation of Farmer Producer Companies in Tamil Nadu

Abstract

Farmer producer organisations (FPOs) in India were introduced as farmer’s cooperative society with the prime objective of enhancing the profitability and productivity of small and marginal farmers by cooperative action. The most crucial element which determines the establishment and success of the farmer producer companies (FPCs) is financial support. Thus, the government is providing direct funding in the form of various grants such as start-up grants, equity grants, mezzanine capital assistance, seed/pulse processing unit and so on. Despite getting huge credit support from the government in the form of various incentives, many companies are struggling and failing to sustain themselves in the long run. The present study evaluated the credit performance of FPCs in Tamil Nadu based on four financial ratio indicators named growth ability, profitability, debt ability/solvency and indicators of per share. The study result indicates that most of the companies fall under the average to low average performance category which highlights the inefficiency in the financial management of study FPCs. Comparatively FPCs’ credit performance was found to be increasing. The results of the analysis shed light on the importance of credit management which is possible through capacity-building training and regular monitoring and guidance for the FPCs in credit handling.