Agriculture financing which is also known as agri-financing is the financing of agriculture-related activities, from production to market. Not all agricultural finance is rural, and not all rural finance is agriculture. There are multiple companies offering financing solutions for farmers, such as affordable insurance & loans so they can purchase important inputs on credit & payback on their own schedule.

Sharing a quick snapshot ON AgriTech business models:

Out of the total projected Agri-Tech market potential of US$24 billion, the supply chain technology and output markets segments have the highest potential in India, worth US$12.1 billion, followed by financial services (US$4.1 billion)

Agri-Tech startups in India operate under 3 broad business models: margin-based model, subscription-based model & transaction-based model. Agriculture financing companies such as DeHaat, Samunnati, JaiKisan, Aggois function under the transaction-based model which is based on the number of loans or insurance policies served.

India is now among the top 6 countries globally with the most venture investments in Agriculture Technology (Ag-Tech). There are multiple drivers for Ag-Tech in India including rural & mobile vernacular penetration. In the past five years, 126 million new rural internet users have come online primarily because of the availability of affordable smartphones, data and vernacular content and technology adoption due to lowered cost of core technology like sensors and robotics

Agri-fintech segment comprises of Ag-Tech start-ups offering financial solutions, such as credit, insurance, warehouse receipt financing, trade financing, etc. Ag-Tech players are leveraging technologies, such as geo-tagging of farmlands and remote crop monitoring, to build risk profiles of farmers and ascertain their credit worthiness. By partnering with banks, NBFCs, and input suppliers, Ag-Tech players offer loans at lesser interest rates compared to unorganized lenders. This segment is still developing in India and has around 20-40 start-ups at present, with prominent players being payAgri, Jai Kisan, Aggois, etc.

Agri-financing is not an easy proposition. For starters, agriculture poses unique risks, both abiotic and biotic, which require going beyond the standard lending practices. The current models of data and risk analytics must be tailored accordingly to streamline the process and usher in greater transparency and trust. It is not surprising, therefore, that only a handful of startups such as Samunnati, Jai Kisan, SAgri and Arya have firmly put their roots in the agri-fintech space to resolve one of the fundamental problems – instant finance.

Authored by

Abhishek Maiti - Director, PGA Labs