Agritech startups in India have been at the forefront of disrupting the sector and transforming it at all stages of the value chain. These include combining farm inputs with physical infrastructure for greater price certainty, engaging in predictive analytics to improve yields, enabling farm management and precision farming, eliminate inefficiencies in supply variation and help farm owners access credit and crop insurance.
As the possibilities continue to expand, the discussion titled “Role of Technology in Accelerating Agriculture Finance”, co-presented by Cropin, YourStory and Think AG, highlighted how technology has particularly accelerated financial access in the agricultural sector through agricultural loans and crop protection value chains.
Moderated by Sujit Janardan Chief Marketing Officer, Cropin, the panel included experts in the field Hemendra Mathurpartner, Bharat Innovation Fund and co-founder, ThinkAg; Azad Mishra, first vice-president of the rural and agri-food group, HDFC Ergo GIC; and Balachandran MKHead, Rural Retail and Microinsurance, SBI General Insurance.
Evolution of agricultural fintech
As agriculture transforms in India through technology and digital adoption, the financial sector has a key role to play in driving economic growth. “Today, an evolving technological landscape offers new credit and risk-sharing opportunities that can increase agricultural productivity,” Sujit said.
With the increasing adoption of internet in rural parts of India, agriculture is witnessing a sea change in its approach to agricultural production and the evolution of its entire value chain. Allied segments like agriculture finance are also part of this process, with traditional banks now partnering with agritech startups to create innovative finance models for farmers and value chains. ThinkAg’s Hemendra said, “I think this is a mega shift as most of these banks have followed the conventional lending framework of Priority Sector Lending (PSL). But what has changed in the past 18 months is their openness to working with startups. So I think it’s, first of all, I would say it’s a game-changer when it comes to the evolution of agri-fintech.
Other trends Hemendra foresees in the agri-fintech space include the productization of fintech solutions and asset finance. He said: “Productization is the result of a lot of data available to assess a farm’s credit. The segment will see several players like credit rating agencies and will become more mature in the future. Another shift will be seen in financing farmers’ working capital for buying farm inputs, discounting bills and financing assets, which I think has huge potential.
Another aspect that technology will eliminate in the future is the transaction costs of loans and insurance. Five years ago, documentation, claims and verification was a physical, time-consuming and tedious process. However, with the entry of agritech startups into the space, the system is now more agile. “Most agtech startups have a presence on the ground that collects various data points for market linkages, farmer advice, etc. This can then double for risk assessment. Banks and startups can also decide on additional data points, which can also be captured for the future,” Hemendra said. Using satellite imagery to capture harvest data to establish risk monitoring, strong market links through institutional buyers are other changes to come, he said. added.
The rise of public-private partnerships (PPP)
The 2022 Union Budget push on PPPs will also become a bridge for government, farming communities and the private sector to build smart and smart solutions for the future. “I foresee that the role of private sector players, especially companies that are in the warehousing space, which is currently mainly in the public sector, needs to be better optimized. Digitization through private sector involvement will help farmers access loans against commodities as it will reduce physical inventory audits,” Hemendra said.
“The PPP model will also make open source data more accessible, which can then fall under artificial intelligence, machine learning and blockchain as part of the proposed AgriStack database, for building solutions. The PPP model can be a game-changer for the sector, in such cases,” he added.
Agile and data-driven agricultural insurance
One of the most effective ways to combat agricultural risks is to have a strong insurance system. Despite the public crop insurance program since 1972, the sector has been plagued with issues such as lack of transparency, inefficient crop cutting experiments, late payment of claims to farmers, among others. However, the Pradhan Mantri Fasal Bima Yojna (PMFBY) launched in 2016 paved the way for private actors to develop their rural portfolio and help acquire new clientele, so that crop insurance is available to every small and medium-sized farmer. in India.
“When we talk about rural and agricultural insurance, I think the product should be simple, affordable and there should be an important aspect of service. The service I am highlighting here is claims. Claims are missing transparency. And this is where new era technology must play a role for insurance players. The government is placing more importance on the process of satellite claims settlement as well as on-the-ground calculations for the claims settlement to bring transparency and faster data transfer,” said SBI’s Balachandran.
Added to this are other insurance market needs such as livestock and livestock insurance, home insurance, and health insurance, among others. According to Bala, technology has already disrupted the way insurance is offered today. “Livestock insurance is offered via a mobile solution. Claims settlement is also done via a mobile application. This has reduced the turnaround time for claims settlements, which is the added value that has arrived. Similarly, today WhatsApp is used for issuing fonts. These technological disruptions are bridging the insurance penetration gap in rural areas,” he added.
PMFBY has a comprehensive crop insurance program, Azad said. “Before PMFBY, farmer declarations were in physical format and the entire booking process was manual. Now, farmer registration is done through the national portal which provides an end-to-end digital platform for banks, agents, brokers, customer complaint centers and individual farmers,” he noted.
There has also been an increase in localized information under new insurance schemes, as well as remote sensing for crop estimation, study of flood maps, crop health monitoring, which contributed to the risk assessment. “Technologies like ML and AI have really made schema implementations so seamless,” he added.
Moving forward with risk assessment
As climate plays a very important role in cropping patterns across India’s diverse geography, financial institutions are also tailoring their services based on information from weather stations and geotagged images to make claims settlements seamless.
“For the restructured interim weather-based schemes which are mainly implemented for horticultural crops in Maharashtra, UP, Rajasthan and Karnataka, States are developing location-specific schemes in consultation with scientists and technical experts in agriculture and horticulture. Most of these offers are customized at the zone or district level, depending on the climatic conditions,” Azad said.
In addition to this, insurance is also being considered, as a value added service for farmers through agritechs. “The biggest benefit from an insurance perspective is the captive customer base available. Farmers are registered on these platforms for multiple services such as weather advice, farming practices and better yield. For insurers, agritech platforms are a new delivery mechanism to reach farmers and for farmers. As per Insurance Regulatory and Development Authority of India (IRDA) regulations, technology partners should eventually become an agent to purchase insurance, which can be a value-added service,” Bala said.
Adapting to changing market conditions is truly essential to efficient financial services markets, with new risks and data that must be ingested every day. AWS, which partners with startups like Cropin, helps modernize, innovate and transform financial inclusion for the agricultural sector.
“We know that many of our customers, especially when we think about the complexity of the agricultural supply chain, need first-party data to be enriched with third-party data and that data to be easily transferred in order to assess potential risks or upside potential of the market. We also know that this data is expected to change rapidly and that credit risk decisions and loan extensions will increasingly be made in real time. We want to be sensitive to how data can move quickly, and that we can ensure that we are risk tolerant where necessary and risk averse where it matters to our food supply,” said the Dr. Karen Hildebrand, Global Head of Solutions. Architecture, Agriculture, AWS.
“Agritech is on the verge of a revolution and the objective is to offer solutions across the entire value chain. Technology platforms becoming intermediaries will certainly solve the problem and the end goal remains to make it easier for end users to sign up for these services. Players like Cropin and others are trying to work with insurers, partners like AWS, and government to collaborate and bring solutions to market that help us solve some of these real problems on the ground,” Sujith said, concluding the discussion.