India | AgTech
Innovations in AgFinTech support financial inclusion in India
Supporting India’s AgFinTech sector to further develop and unlock financing for the country’s smallholder farmers: that was the aim of ‘Data & AI for Agriculture Financial Inclusion’, a two-day conference Rabo Foundation organized in New Delhi at the end of 2022. Participants had the opportunity to network, start collaborations, acquire knowledge and get inspired by best practices.
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dollars in investments
As seen above, the potential market of the AgFinTech sector in India has become quite sizeable.
At the same time, investing in this sector is still considered to be quite risky. Only a thorough understanding of India’s agricultural ecosystem and all of the stakeholders involved can justify responsible investments.
In order to entice more investors to invest in the Indian AgFintech sector, and subsequently make credit more accessible to smallholder famers, Rabo Foundation brought together more than 150 participants, including representatives from financial institutions, investors, accelerators, consultants, international development partners, NGO’s and many AgFinTech start-ups.
Insights into credit scoring
Rabo Foundation sees credit scoring models as key to successful and large-scale financing of smallholder farmers. These models help to easily determine the farmers’ creditworthiness, which makes it more likely for them to find financing. Consultant Tanya Lagoda works for Rabobank/DLL and specializes in such models. She hosted four technical sessions on this subject: “Many of the attendees often already have the data and knowledge to build a good credit scoring model, such as data on crop yields, income and soil quality. So I explained how a model helps to score – or even predict – a farmer’s creditworthiness. We also discussed how you can build such models – even with only little data available – and what is needed to create a complex one based on credit scoring.”
Easy upscaling of credit scoring
One example of successful credit scoring using data and technology among the event’s participants is SatSure. This Indian company offers a suite of applications called SatSure Sage. The apps facilitate lending institutions make smart decisions about agricultural loans. This would normally be a challenge, as it’s hard to get access to important documentation on smallholder farmers, like their past history of crops grown, land record details and bank statements.
SatSure Sage uses AI and machine learning models in combination with satellite data and location intelligence to quickly bridge the information gap. That allows lending institutions to scale up and cater to many more farmers, while reducing their own operational costs per farmer. The suite furthermore assists lending institutions in managing post-disbursement recoveries of loans, all the while promoting financial inclusion as many more farmers are able to gain access to credit.
While SatSure is quite far along in the development of their credit scoring model, their co-founder and CEO Prateep Basu still attended one of the technical workshops on credit scoring. “It helped us understand more about the credit systems that work in developing countries and what kind of variables need to be used while building credit models for them to create robust and scalable solutions.”
Alternative creditworthiness with AI
Another example of a company with an advanced credit-scoring model is the Indian firm Stellapps. Their product ‘mooPay’ uses historical data on the quality and quantity of milk that farmers bring to market. In conjunction with credit bureau Equifax, mooPay generates an alternative creditworthiness ‘mooScore™’. Using AI, mooPay analyzes historical data on milk production and provides details to its banking partner that helps underwrite credit risk. The tool also generates an eligibility list that is shared with farmers, showing each of them what loan product they are eligible for.
Through mooPay, farmers not only gain access to loans, but also other financial services such as withdrawals from their bank account, deposits into their account and domestic money transfers. In short, mooPay makes it possible for banks to microfinance smallholder farmers and for those same farmers to get easy access to basic banking services.
Rahul Mallick, CEO of Stellapps, was also present at the conference:
“We gained valuable insights. For instance into how Rabo Foundation uses various data sources for credit underwriting, such as remote sensing, clickstream data, open banking, Google Street, Google Trends and psychometric data. This provided us with ideas to improve our own capabilities. Furthermore, we got the opportunity to learn from other players in the industry and how they use agri and allies’ activity data for credit scoring.”
Credit scoring specialist Tanya Lagoda mentions how amazed she is by the progress some companies have made since the first conference Rabo Foundation organized on this very same subject in 2020. “Take SatSure, who at our first event discussed how they had only just begun their journey. Today, they are already a well-known company producing a farmer score that’ll be part of the TransUnion value proposition.”
Like Lagoda, Rabo Foundation’s Program Manager Innovation Anne Rappoldt was impressed by what she saw at the conference. To her, the event underlined how rapidly AgFinTechs are growing in India. “They take advantage of various positive developments, such as increased smartphone penetration, internet usage, and changes in demographics leading to a younger population. In the process, India’s AgFinTech sector is getting even more advanced and dynamic than it already was; an even stronger global frontrunner.”
“The conference also underlined that there are plenty of opportunities for collaboration between AgFinTech companies and financial institutions”, says Bram Spann, Program Manager Asia at Rabo Foundation. “AgFinTechs are a channel for banks towards a rather unknown and underserved segment in the agricultural sector: smallholder farmers, with the data generated from AgFinTech platforms.” In this sense, he adds: “AgFinTechs can act as the glue that keeps banks and smallholder farmers together.”
Rappoldt notes that the event made equally clear that credit scoring is “a journey”, and that there is no one-size-fits-all solution. “Each use case may require specific solutions. What is critical for success, though, is the right collaboration between all stakeholders, aimed at delivering innovations on such a large scale that it unlocks finance for smallholders.”
Looking towards the future, Tanya Lagoda advises start-ups “to keep going, be creative and pilot new ways of using data and AI, in order to engage more with customers and make interactions both easier and more meaningful.” And financial institutions? What should they focus on? “If they want to take up the challenge of keeping pace with AgFinTech companies and growing their portfolio, which I’d recommend, then at least one thing is indispensable: they need to show more agility.”
AgTech in India
The AgTech sector in India has grown significantly in recent years, driven by advancements in technology such as the widespread use of smartphones and Aadhaar, a unique 12-digit number linked to biometric and demographic data.
AgFinTech solutions in India have evolved to provide a more comprehensive view of the challenges faced by farmers, offering a ‘one-stop-shop’ for all their needs. The sector focuses on different aspects of the value chain, such as input supply, production, storage, transportation and processing. And is now moving towards vertical integration, which provides network effects and efficiencies.