Zara owner Inditex is partnering with DBS Bank to scale India’s organic cotton industry by providing easier and faster access to funding for more than 2,000 farmers in the fashion giant’s supply chain.
While India is currently the largest producer of cotton globally, with the greatest land area used for cotton cultivation in the world, organic cotton only comprises around 2% of the total amount of cotton produced in the country.
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The pilot project aims to address key challenges facing India’s organic cotton industry, which include a highly fragmented farming community comprising close to 170,000 farmers scattered across mainly nine states. The majority are small-scale cotton growers with limited financial means and knowledge to invest in and implement sustainable farming practices.
The country also faces a disconnect in demand and supply due to a lack of transparency in supply chains with much of the trade remaining manual in nature. There is also a lack of traceability and integrity as to whether the organic cotton has been farmed and processed in a sustainable manner, resulting in farmers being unable to transact at a premium.
To address these pain-points, Southeast Asia’s largest bank and Inditex, which also operates the Pull&Bear and Bershka chains, will work to leverage the network of local Farmer Producer Organisations (FPOs) to reach more than 2,000 farmers in Inditex’s supply chain to evaluate their financing needs.
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Under the pilot programme, DBS will then arrange financing for the FPOs to procure organic cotton from the farmers. This will provide farmers with greater visibility of their cashflow, enabling them to better plan their business needs and, in turn, grow their sustainable farming operations.
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By GlobalDataTransparency is also another benefit as the programme eliminates the middlemen in the organic cotton supply chain. The project, combined with other tracking mechanisms, will enable Inditex and cotton spinners (the main buyers of cotton from farmers) to trace the source of the cotton directly and ascertain if it has been farmed sustainably, ensuring farmers secure a higher premium for their organically harvested produce.
In terms of environmental impact, traditional farming practices have resulted in soil fertility challenges across India. With easier and faster access to funds facilitated through the pilot programme, it is hoped more farmers will be encouraged to farm organic cotton and to adopt sustainable farming practices to nurture India’s agricultural pastures back to health.
