This blog looks at an agtech that works toward finding lucrative markets for the most challenging sub-segment within the low- and moderate-income segments—small and marginal farmers (SMF). We look at the agtech’s journey and the impact of COVID-19 on its work.
This blog is about a startup under the Financial Inclusion Lab accelerator program, which is supported by some of the largest philanthropic organizations across the world – Bill & Melinda Gates Foundation, J.P. Morgan, Michael & Susan Dell Foundation, MetLife Foundation and Omidyar Network.
Around the world, small and marginal farmers get a meager share of the overall value created in the agriculture supply chain. This is mainly due to three critical inefficiencies, as highlighted in Figure 1. PayAgri is a platform for farmers that works to overcome them and optimize returns for the farmers.
The founders of PayAgri, Rajeev J. Kaimal and Rajkumar KVM started their venture based on a strong need for a holistic solution that could improve the economic condition of farmers. They felt that piecemeal solutions are unlikely to create a desired and sustainable impact.
Figure 2: Rajeev J Kaimal and Rajkumar KVM, the founders of PayAgri
Rajkumar is an investment banker who comes from an agricultural family in Theni, Tamil Nadu. Rajeev G. Kaimal worked in the rural banking and financial services space for over 18 years. In 2014, Rajeev became the founding member of Samunnati, a finance company that worked in the dairy value chain. Rajkumar joined later as a consultant to help build products and set up the company’s trading division. They saw the plight of small farmers in India as a problem that needed a solution—one they sought in the agricultural space.
Their shared interest and common passion in agriculture prompted them to conceptualize PayAgri in February, 2017. Its objective is to use technology to create an inclusive economy that takes care of the aspirations of every player in the agriculture value chain without compromising on the interest of farmers.
Connecting farmers to lucrative markets
At present, small and marginal farmers take the smallest share of the consumer’s rupee in the entire value chain—under 30%. A large part of that goes to various intermediaries and is absorbed in market (mandi) fees and commissions of the Agricultural Produce Market Committee (APMC) markets (Figure 3). While intermediaries perform a critical role in the value chain, some optimization is necessary to help small and marginal farmers get a larger share of the overall pie.
Typically, the farmers get fair prices for their grade A produce easily through retail vegetable vendors. Yet they struggle to find a market for grade B and grade C produce. Other factors like delay in payments by traders, non-transparent pricing, and limited technology go against the interest of small and marginal farmers.
Figure 3: Local supply chain
Rajeev and Rajkumar realized that they could support farmers in terms of both market and financial linkages. Of the two, market linkage has been their current focus as it is easier to achieve and provides immediate relief to farmers. The FI lab supported PayAgri and its registered farmers to help farmers get a better price for their produce. This support also strengthened PayAgri’s forward linkages by:
Further, PayAgri constructed a warehouse near the consumption hub to store farmers’ produce. Through these strategic steps, they were able to eliminate a few intermediaries and ensure better price realization for the farmers.
In the next round of technical assistance, the FI lab helped PayAgri conduct a baseline assessment to identify potential intervention areas and ascertain the priority to digitalize the Agri value chain in the Nilgiris district of Tamil Nadu. The findings of this study helped PayAgri assess the efficacy of its intervention to help the community to get higher returns on investment from the value chain of root vegetables. The program also initiated a pilot diagnostic study that supported PayAgri to build an impactful medium-term strategy on digitalization.
The impact on small and marginal farmers
Based on the digitalization strategy, most of the interventions from PayAgri fall under different types of linkages, such as:
The immediate requirement for small and marginal farmers is to facilitate market linkages and to help them to grade, sort, and package their produce. With its agri-hub model running in a few cities, PayAgri has been able to support the farmers in all these areas, resulting in better prices to farmers for their produce.
With farm-gate procurement followed by grading and sorting, PayAgri offers 10-30% more to farmers, depending on the crop—zucchini, capsicum, carrot, coconut, grains, and fruit, among others. This has been a result of the elimination of intermediaries from the value chain and partnerships with last-mile corporates and other retailers (Figure 4). Until 2019, PayAgri had an impact on over 2,000 farmers in terms of better incomes, through its platform with transaction values totaling over INR 60 million (USD 790K).
Figure 4: Tech-enabled supply chain
Besides driving market linkages, PayAgri has influenced farmers to improve the soil quality by sourcing organic inputs, which will help the farmers in the long run. PayAgri’s plan to provide holistic support and digitalize the entire Agri value chain for such small and marginal farmers will not only bring about reforms and efficiencies into the value chain but also help these small farmers build digital footprints. These digital records will make them creditworthy for the formal lending or banking institutions to lend against.
Roadblocks
“Working at the ground level is not an easy task”, says Rajeev, while speaking of the many hurdles that they encountered in the process. Although the current impact is a good start, PayAgri seeks to scale its operations and make the impact sustainable. Some of the major challenges that PayAgri faced or still faces are:
COVID-19, the unlikely catalyst to PayAgri’s success
Due to the current pandemic situation, PayAgri has delayed implementing its long term strategy. However, in general, the pandemic has been a blessing in disguise for the start-up and for the farmers and clients it serves.
Figure 5: PayAgri successfully delivered 12 trucks of rice and pulses to six cities in seven days, serving the farmers and the community
This blog post is part of a series that covers promising FinTechs that are making a difference to underserved communities. These start-ups receive support from the Financial Inclusion Lab accelerator program. The Lab is a part of CIIE.CO’s Bharat Inclusion Initiative and is co-powered by MSC. #TechForAll, #BuildingForBharat
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