DBS has partnered with global fashion retailer Inditex, which owns brands such as Zara, Pull&Bear and Bershka, in a cotton-procurement financing programme, in an effort to scale India's organic-cotton industry.
The programme, which expects to disburse payment to more than 2,000 farmers in Inditex's supply-chain ecosystem, seeks to address several pain points in India's organic-cotton industry.
These include high fragmentation, with close to 170,000 farmers scattered primarily across nine states, the majority of whom are small-scale cotton growers with limited financial means and knowledge to invest in sustainable farming practices. Other issues include a supply-demand disconnect due to a lack of transparency in supply chains, and a lack of traceability and integrity as to whether the organic cotton has been farmed and processed sustainably.
Under the pilot programme, DBS will tap the local network of Farmer Producer Organisations (FPOs) to reach more than 2,000 farmers in Inditex's supply chain, in order to evaluate their financing needs.
In India, FPOs are agricultural cooperatives that aim to expand small and marginal farmers' access to better technology, credit and more markets.
The bank will then arrange financing for the FPOs to procure organic cotton from the farmers in a timely fashion.
The bank said in a statement on Wednesday: "This provides farmers greater visibility of their cash flow, enabling them to better plan their business needs and in turn, grow their sustainable farming operations."
By eliminating the middleman in the organic-cotton supply chain, the pilot programme also improves transparency and tracking.
With growing focus on climate risks and social inequality, the global cotton industry offers opportunity to invest for positive impact, said DBS' group head of western multinational corporations, Terence Yong.
Organic cotton comprises only around 2 per cent of the total amount of cotton produced in India, despite it being the largest cotton producer in the world.
Mr Yong said: "Globally, our clients are increasingly mindful of looking for ways to add societal and environmental value through their business decisions, with many taking the leap to digitalise their supply chains to enhance transparency and traceability of transactions made."
The bank's head of priority-sector lending Arvind Sharma said the programme is part of DBS India's larger plan to build its priority-sector lending business. This business covers underbanked sectors, which India's central bank considers important for the overall development of the economy. They include agriculture, affordable housing, education, renewable energy and small businesses.