Innovator Spotlight: farMart

The Journey

farMart is an AgriFinTech platform that helps smallholder farmers get access to low-cost digital credit by linking credit to inputs purchase at the point of sale. We (Lokesh, Mehtab and Alekh) founded farMartin 2015, with a mission to make farming a financially rewarding and environmentally sustainable business by offering advanced mobile technology services to farmers. Our journey to reach the product market fit has been one of immense learning and continuous iterations along the way. After raising our seed round from the Indian Angel Network (IAN) and LetsVenture, we scaled our previous business (Uber for tractors) and reached 10,000 farmers. However, we knew we were missing something as the farmers liked our product offerings but did not love it. As our laser focus on our repeat customers and NPS metrics. We went back to our customers and dug deeper to gather more insight into the problem at hand. We realised that while the problem of renting farm equipment exists, the most important problem smallholder farmers faced was access to formal credit. As credit is the primary driver of input decisions (quality of seed, fertilizer, ag-medicines) for smallholder farmers.

India's Ag-finance landscape for the smallholder farmer

In India, less than 20% of smallholder farmers that constitute over 85% of the market have access to credit from formal financial institutions. Traditional financial institutions like banks and NBFCs do not prefer lending money to smallholder farmers as they have no mechanism to assess their creditworthiness, track utilization and collect small ticket size payments from farmers. Due to these reasons, smallholder farmers are starved of formal credit and have to rely on informal channels to meet their credit needs. Agriculture is a seasonal activity and informal lenders tend to exploit farmers as capital is scarce during particular periods in cropping cycles. The reason for this; i) farmers prefer to hoard some portion of their harvest, in order to sell their output at higher prices post the harvesting season, ii) farmers tend to run out of money in the middle of the cropping season. Due to this scarcity and dire need, farmers are left with no option but to borrow money @ 3 - 4% per month. This effectively translates to 18 to 24% interest for a single crop cycle (6 months).

A Transformation Story

One such story to throw more light on the problem at hand is of our customer -Babita. She is a 38-year-old widow, who resides in a village called Bhitura in Barabanki district of Uttar Pradesh. Babita owns 1.5 acres of land and grows wheat, paddy, and peppermint on her land. Since her husband passed away, she is the sole breadwinner of a family of four and is responsible for farming their ancestral land. To meet her credit needs, Babita tried applying for a formal Kisan Credit Card (KCC) loan from a local branch of a public sector bank multiple times. However, her application was rejected each time as the bank officials asked for multiple documents like land ownership, house ownership, asset ownership, NOC from nearby bank branches and patwari (land record owner). Due to her limited literacy and a lot of paperwork involved, she decided it was best to borrow money from local moneylenders just like her husband used to. However, due to the stigma attached with being a widow in a village community, it was not easy to access credit and she had to visit multiple money lenders before she could get a small ticket size loan (INR 500-2000). The money lenders also charged her a higher interest rate as compared to other farmers in the village as she was perceived to be riskier client due to her gender. These hardships demotivated Babita to farm her land and she often thought of giving her land on rent to a sharecropper. Just before the last rabi season sowing, her son saw farMart’s facebook video advertisement and told his mother about it. Babita decided to call on our helpline number to see if we could offer her our services in her village. Our team asked her to visit our closest offline retail partner store with her aadhaar card and land ownership certificate. Babita came the next day to the store and our offline partner assisted her by filling the loan application digitally through our APP. Within 10 minutes Babita came to know that she was eligible for credit line through our partner financial institution. Within three working days, farMart issued her a virtual credit card ID through which she could now buy inputs like seeds, fertilizers, agri-medicines and rent tractors from our offline channel retail partners. Babita was grateful that her loan was approved, with ease and that she no longer needed to be dependent on anyone for meeting her credit needs.

Just like Babita, 87% of our farmers are first-time borrowers. We deliver happiness and dignity to the people who have the most important job in the world- grow our food. We have deeply understood the need and behaviour of smallholder farmers and have built a tailored tech-enabled solution which makes the process of receiving credit “hassle-free” for the farmers:

i) APP based credit assessment and loan application (3-day loan approval)

ii) Input backed collateral free credit lines

iii) Flexible repayment options (in small amounts or bullet repayment) as farmers have lumpy seasonal cash flows.

Advantages of the farMart Model

Our unique ‘Closed-User-Group’ lending model enables a cashless ecosystem as there is no cash disbursement to farmers. We are able to channelize the credit to an income generation activity which helps financially discipline the farmer and enables him/her to remain out of the debt trap.

farMart aims at not only solving the credit problem for farmers but also solving NPA problems for banks and financial institutions. In India each year, 18% of the credit (INR 11 lakh crore) is allocated towards agriculture credit under the priority sector lending (PSL). However, financial institutions face challenges in deploying and tracking capital, as the banking ecosystem relies on self-reporting of the consumer to track or report usage of loans. In most cases, farm loans have been diverted to conduct marriages in households, build houses, etc. The ecosystem grapples with an acute challenge of loan usage monitoring. Our plug and play model helps any financial institution reach farmers in a seamless and cost-effective manner. farMart’s high tech-low touch approach helps FI’s assess creditworthiness, track specific utilization increasing the visibility on end use of credit and collect re-payments from farmers digitally. We are leveraging technology to disrupt the traditional cost structure for servicing the farmers.

ThinkAg is a great out-of-the-box initiative which can result in tangible meaningful change to the agricultural sector through crossbody collaborations. The idea of getting high-quality policy makers, government officials, corporates, banks and startups under one roof is unique, which can lead to interesting collaboration opportunities. farMart got an opportunity to present at the ThinkAg “Agriculture Financing” forum recently held in Mumbai. The closed-door event, not only helped us spread the word about our work to the larger agri-fraternity but opened doors for some potential partnership opportunities with banks and market linkage companies. Endorsement by ThinkAg team goes a long way in helping open the right doors for startups.

Alekh Sanghera is co-founder/CEO of AgriFintech platform farMart. Alekh has cross-continent experience of Africa and Asia while working in with a global financial inclusion consulting organization named MicroSave. He has worked extensively on a variety of projects with international donors- Gates foundation, World Bank, UNCDF- and Government of India apparatus. Alekh expertise lies in building solutions to migrate people from the cash economy to the digital economy.