Nabard and TAC Ecosystem Work-session Output

17th Oct’23 @ Bengaluru

NABARD and The Agri Collaboratory (TAC), an Agri Think & Do Tank conducted a consultation workshop in Bangalore on “Democratizing Finance for Smallholder farmers” with industry leaders and partner organisations. This will hopefully be the first in a series of several consultation workshops over the next year.

Workshop Objectives and Structure

1. Industry perspectives on Democratising Finance for Smallholder farmers: Agri Fintech issues, obstacles, and existing approaches like RBI’s frictionless credit.
2. Importance of an Agri Data Exchange and Agri Data: understand data sources available, and potential benefits of using an Agri Data Exchange.
3. The Agri Collaboratory’s Project AgCx: Objectives and a “Proof of Concept” (POC) catering to interests of lenders and ~50K small holder farmers at AP, Karnataka, Odisha, Assam, and Telangana. Agree on a joint execution plan under the overall guidance and ownership of NABARD.
4. NABARD's perspective & Next Steps

Workshop Conclusion, NABARD’s perspective, and next steps:

At the end of the workshop, Mr. Shaji, NABARD chairman provided his insights from the day along workshop with his recommendations and suggested next steps. He recalled his time on the NPCI board and urged the attendees to think as innovatively as when UPI was introduced, for the benefit of Indian Agriculture and the smallholder farmer.

Mr. Shaji found the discussions insightful and indicated his alignment with TAC’s “integrated” approach -- holistically looking at issues important for lenders as well as smallholder farmers and deploying technology with farmer connect through FPOs & Cooperatives. NABARD is aligned to using Digital Public Infrastructure for rapidly solving problems at a national scale and willing to explore participation in the project AgCx.

He made some critical recommendations for mutual consideration, which are grouped below:

1. Leveraging Rural / Co-Op Banks: Cost of credit of commercial banks is close to 4 times that of RRBs hence RRBs and Co-Op Banks (State & District level) & Land Development Banks be considered actively as lending partners which would enable them to expand their potential in Agri finance.

a)This may also reduce by half the approx. Rs 20,000 Cr spent by the GOI on interest subvention

b)Digitisation of PACs and District Co-Op banks needs to be emphasised across phases (historic documents, underwriting process, disbursement & documentation).

c)Without digitisation, PACs may struggle for refinancing after a few years.

d)While PACs will facilitate, District Co-op banks will do most of the lending.

2. Smallholder and tenanted farmers: Newer FPOs will be set up as Co-Ops and should help smallholder and tenanted farmers access the formal financial system - even non-members.

3. Data Standardisation is imperative nationally to avoid state level variations. A national Co-Op stack will be facilitated by GOI and NABARD – who will also manage a database of 140 million farmers.

4. Scale of Finance by agroclimatic zone: While 13 (smaller) states have accepted an approach of “One State - One scale of Finance” the larger states have scales of finance defined for each district. The ideal would be to have scale of finance, standardised by Agro climatic zones across India.

5. Consider integrating solutions on Agri Insurance, finance, and credit rating for farmers. Agri Insurance Cos face challenges due to extreme weather/climatic variations, and struggle to sustain themself. Agri Insurance Corp of India - has developed digital capabilities with the use of satellites. NABARD can structure some guaranteed products for the lenders, but some innovation is needed

Discussion Highlights

Section 1 - Industry’s Perspective: Accurate digitised data and adequate, timely finance are the biggest hurdles in the growth of the sector. Indian agriculture needs Rs 40-43 Lakhs Crores each year, with a budget allocation of Rs 20 Lakh Crores. There is a significant potential to formalise Rs 20-23 Lakh Crores. Collaboration between the stakeholders in the ecosystem i.e., Government, FinTechs, Academia, AgriTechs, Non-profits and Co-operatives is needed to enable the flow and timely recovery of Agri Finance.

Section 2 – The issues around Agri Data Sources and Data Exchange in Agri are three pronged:

1. Inaccurate or ineffective data - such as misspelt / varied location names with no geo coordinates, split of land parcels within family, census, carbon credit, etc.
2. Lack of easy access - in general consistent crop signatures and land data is not available in most states and most don’t have it in API formats for AgriTechs and FinTechs to use.
3. Unavailability of information - data available with govt don’t include inputs on mortgaged land and cadastral maps; satellite data is not able to accurately link land parcels to owners.

Agri Data Exchange (ADEX) is an open-source, publicly owned Agri Data Exchange platform launched by IISc (IUDX) in partnership with Govt. of Telangana. An Agri data exchange is crucial to enable multiple data providers to collaborate with a focus on governance, transparency and user consent. Though satellite images and AI are being used to identify land with similar cropping and soil types, there are challenges in degree of accuracy which can be overcome by feeding in data from multiple sources – Govt and Private.

TAC and IUDX will leverage this data exchange to expand the use of data by several Sates, for Agri use cases.

Section 3 – TAC’s Project AgCx seeks to “Democratize Finance for Smallholder Farmers” by triangulating consented, multi-year, public, and private data sets at high speed and low cost to create an affordable digital assessment of farmers to target a national scale of 50-100 million farmers. it is also exploring how to enable the use of alternate data-based and transaction (cash flow) based lending.

Proof of Concept: TAC and its strategic partners (Kalgudi, Vrutti, IUDX, WhatsLoan etc.) proposed a Proof of Concept (POC) for the project AgCx in 5 states (KA, OD, TG, AP & AS) to NABARD wherein the project framework, digital platform architecture, lender onboarding, stakeholder roles and responsibilities, were shared. This POC is planned to iteratively build the AgCx hypothesis with ~50K farmers across 5 states.

TAC requested NABARD to guide and anchor Project AgCx to provide national impact (100 million farmers):

1. Requested sponsorship from the Chairman & support from National & State CGMs
2. Have Regional Rural Banks & District Co-Operative Banks in 5 States to onboard AgCx POC.
3. Chair quarterly review sessions - nationally and for each participating state.
4. Participate financially in the project.
5. Guidance on regulatory and compliance issues.

NABARD promised to provide further inputs and suggestions to structure this POC within 15-days.

Participant Speakers

Shaji KV – Chairman, NABARD,

Sanjeev Rohilla - CGM Data Management, Analytics & Business Intelligence N,ABARD,

Manikumar S - CGM Strategic Planning and Product Innovation, NABARD,

T Ramesh – CGM, Karnataka, NABARD

Anil Kumar – CEO, Samunnati,

Ashutosh Vaidya - Co-Founder, The Agri Collaboratory (TAC),

Sanjiv Jha – CTO, Public Sector, Amazon Web Services (AWS),

Inder Gopal – Professor IISc & Ceo IUDX,

Timmana Gouda – CEO, WhatsLoan,

Raj Vallabhaneni – Founder & CEO Kalgudi,

Raghini Bhadrinarayan – CEO, Vrutti,

Nipun Mehrotra - Co-Founder & CEO, The Agri Collaboratory (TAC)