It was the month of October when we visited the village of Honnakiranagi in Kalburgi taluk. Being seated at the baroque temple with farmers and sipping tea with them, we were listening to their needs, aspirations and pain points. While many farmers were concerned about lowered productivity this year, owing to scanty rainfall, some spoke about the need to get better prices for their produce. Most farmers in the group had small to medium size land holdings and were mostly dependent on government MSPs to get good returns for their harvest.
Deep in conversation with them, we asked about the MSP procurement process and what they would want from this. “MSP payment gives the best price for our produce, but payment comes at an unpredictable delay, anywhere between one and three months”, said Basappa, a progressive farmer. “Toor crop has a six-month crop cycle. We often borrow money for our expenses if we are short of the same. Harvest season gives us hope that we are going to get paid and pay off our debts and also think of saving some money for the future. However, payment delays from the government increase our problem,” said a senior villager.
We asked them what could be one single thing that they would want us to do in order to solve their problems. A farmer sitting there and deeply observing our conversation thoughtfully said, “currently, whoever wants immediate payment is forced to sell toor in the APMC at market price, which was Rs 35 last year, against MSP price of Rs 60. If you can develop a mechanism for us to get immediate payment for up to Rs 5 per kg of cut, we are more than willing to give all our produce through that channel”. Another farmer added to this, “we anyway have to incur extra cost for transportation to APMC for selling our produce at market price. We have no issues in getting this much money less for a direct sale at MSP price for immediate payment”.
We also spoke about other issues of farmers ranging from a lack of high-quality agricultural inputs, the shortage of farm labor and machinery, and the problem with crop insurance. Resolving to come up with solutions to their problems and work with them directly, we exchanged greetings and left Honnakiranagi for the next village.
We spoke to more than 250 farmers across villages in Kalburgi and understood their problems, needs, and aspirations. Their range of issues is largely the same. Sitting at the dinner table with our advisor, Jagadeesh Sunkad, who has been into the field of agriculture for more than 20 years, and discussing ways to solve farmers’ problems and create a sustainable business model, we came up with the idea of unsecured loans to farmers against MSP receivables. Idea is to issue loans to farmers against a valid MSP receivable for a service fee. This would potentially be a huge Fin-Tech opportunity in agriculture, there are around 7 crores farmers producing 22 commodities covered under MSP in India.
Returning back to Bangalore, we channelized our energy in conceptualizing a business model to make this idea work. We have got an in-principle agreement with a leading NBFC in the rural segment to do a pilot with us. We also spoke to many institutional investors and they showed interest in the model and would be willing to be a part of our journey post-pilot. We are currently in process of closing a bridge round, which would seamlessly take us to next round post-pilot. We are also in process of tying up with local institutions and leverage their infrastructure to seamlessly execute our pilot.
We look forward to making average Rs 30000 ticket sized loans to farmers for average Rs 1500 service fees per loan based on initial credit scoring from data available from local institutions. We are also setting up technological infrastructure in order to make pilot seamless and help things scale fast.
For people interested in our journey and willing to be a part of it, please contact me at email@example.com.