Project AgCx – Automated Agri Credit Assessment - Approach Note

Motivation - The “Why”: As per Agriculture census, 2015-16 India has 126 million small and marginal farmers and requires Rs 37-40 Lakh Crore of working capital annually. RBI (2019) estimated that approx. 59.1 % of small and marginal farmers and 30 % of agricultural households avail credit from non-institutional sources probably since they cannot offer collateral. As per RBI “farm credit is largely dependent on the operated area due to constraints on data available on other credit determinants”.

Cash-Flow Lending - An exciting alternative vision: While collateral-based lending favours farm owners -- cash flow lending focuses on the “farmer” rather than the “owner” and will help integrate millions of tenanted and women farmers with no access to collateral. Gradually credit histories get built up, further integrating them into the formal national economy. We estimate cash-flow lending will formalise ~ 20 Lakh crore of Agri loans into institutional lenders.

The 2025 Vision: Padmavathi, a tenanted farmer grows paddy on a two-acre farm, requires a loan quickly since the sowing season has started early. She approaches her village level entrepreneur (VLE) part of the FPO with her details. Much like a LIC agent / independent financial advisor, the digitally trained VLE captures her details with consent, accesses pre-approved lender templates to help her understand and select the best options and submit the loan request digitally. Within minutes, Padmavathi gets approval from 3 banks, chooses one and links insurance to cover the loan. Some money is transferred to an input seller of her choice and balance into her bank. The VLE coordinates the process and she pays him for his advice. The lender is given periodic updates on her crop’s progress.

Project AgCx Objective & Scope - The “What”: Project AgCx seeks to re-think Agri Credit for all farmers - especially small holder, tenanted, women farmers by triangulating consented, multi-year, disparate, public, and private data sets at high speed and low cost to create an affordable digital assessment of 1) Farmer’s household, 2) Her Farm, 3) Crop - in a few minutes, at a base cost of Rs 50, to achieve a national scale of 50-100 Million farmers,

Roadmap - The “How”: TAC partners with the Govt, Agri Tech’s and data providers to integrate data flows and leverages a Data Exchange and other Digital Public Goods to ensure speed and affordability. The insights from diverse datasets, combined with local data, along with policy and regulatory changes, can provide accurate, real-time credit assessment for millions of small and marginal farmers. Funded by lenders and operationally run by a public – private institution, this will digitally reengineer and accelerate existing Agri lending mechanisms – collateral based or by enabling cash flow lending for farmers based on digital footprint created.

The Project AgCx will focus on a 3-5 year, 4-phase implementation plan:

Phase 1: Project AgCx - Concept Development, Experiments & Buy-in from Stakeholders (domain, technology, government, funders): TAC has led a series of consultations with industry and tech players on approaches for this project. In parallel, experiments are being conducted at Mulkanoor & Jammikunta, Telangana to test Project AgCx hypothesis across stakeholders: The experiments collectively aim to examine issues related to Agri credit (and more broadly, rural finance): Insufficient cashflow; specific challenges for small, marginal, tenanted and women farmers; glacial credit processing, lack of personal financing products etc.:

• Partner coalition: Co-opt an “Operating Team” of tech., domain, govt, entities who believe in an open collaborative approach.
• As-is Process mapping: Document “on ground” processes followed by lenders and their variance from “suggested” guidelines to assess & approve Agri loans. At first glance, the criteria vary widely across lenders and from state / regulator mandates.
• Farmer Demographic Understanding: Survey 3000 farmers to capture feedback on lending products, existing credit process and hurdles (process time, documentation, reasons for delays / rejections); support from FPO / farmer collectives.
• Lender Buy-in: Identify alternate credit assessment parameters acceptable to NABARD, RBI, public & private lending institutions replacing physical collateral with “information” as collateral.
• Data integration: Ability to accurately extract farmer credit assessment parameters, from Government, public and private data sets (e.g., Satellite data for historical crop yield, irrigation, local demand, soil, credit history and loan usage).

Phase 2: Proof of Concept (POC): Conduct several controlled (iterative) experiments (POC), in 3 districts, 6 talukas with about 30,000 farmers to develop and validate the following key Project AgCx steps:

• Cash Flow Lending and generation of Farmer’s digital markers: Build an industry approach for farmers to access finance by leveraging and motivating new digital markers. Explore using interest subvention from the Govt to be integrated with Project AgCx platform to attract Micro Finance Institutions and other informal lenders and to generate new digital footprints for the farmer. Similarly integrate “input cost insurance” for farmers to motivate new digital markers. Gradually these will build up a sizeable amount of credible digital markers that over 3-5 years, can create a base of data for cash flow lending to farmers.
• Enable data sources: Validate accuracy of Government and Private data with farmer level ground truthing.
• Aggregate Data: Triangulating consented, multi-year, disparate, public, and private data sets flowing real time through a semi-automated process to validate its suitability to create the credit assessment report.
• Automate data interoperability at scale: Test an automated Agri Data Exchange and Credit Application with the selected data streams with automated Agri Data Exchange to process transactions in minutes and at low cost (~ Rs 50 to 100 / farmer).

Phase 3: Pilot: Conduct pilots using learning from the POCs, across agronomic zones, in10 districts for 100,000 farmers:

• Integrate market access: Experiment on farmer access to market (mandi, warehouse etc.) using ONDC and other digital public Goods / Infrastructure – within overall cashflow lending for small, tenanted farmers.
• Integrate Insurance: Help farmers recover basic input cost when crops fail, which is a motivator to digitize end-to-end processes.
• Test wider applicability: - include broader datasets by onboarding 15+ Data Providers and 10+ Agri lenders.

Phase 4: Field Trial Roll-Out: Rollout field trials for AgCx in several states and establish self-sustainable commercial business models. Onboard 25+ Data Providers and 25+ Farm Credit lenders.

Next Steps - The “Ask”: Project AgCx needs financial support, over 3-5 years, to enable phases 1-3, with continued refinement of Project AgCx’s technological architecture and business framework, to achieve impact at scale.

The specifics can be discussed and fleshed out with interested participants.

The Agri Collaboratory [TAC] is a “non-compete” not for profit, Agriculture “Think and Do Tank” helping co-create Digital Public Good and Infrastructure (“Digital Rails”), in open source with the ecosystem and the government. It was formed in 2021 with co-founders from diverse disciplines, leveraging the power of collaboration across Govt, Private & Academic Ecosystems; Open-source technologies and a borderless “outside in”, pool of global expertise, to solve complex societal issues. TAC is inspired by the vision of India emerging as a global leader in open source Agri innovation and the Indian [small, tenanted, women] farmer to be profitable, sustainable, and resilient.

TAC engages closely with the Government of Telangana, CGIAR, Niti Aayog, Samunnati, iSPIRT, Linux Foundation, Research & Innovation Circle of Hyderabad [RICH]; IISc [IUDX Team], Social Alpha, Digital Green, as well as several Agri Tech Start-ups.

TAC is an “Agri ecosystem builder” and the primary point of contact for stakeholders and the general administrators of the project.