Banking Frontiers organized a web panel discussion where agri bankers and agri experts exchanged valuable insights:
Agriculture, with its allied sectors, is one of the largest sources of livelihood in India. A high proportion of agricultural land and diverse climate encourage multiple crop cultivation. In fact, the Gross Value Added (GVA) by agriculture, forestry, and fishing was estimated at Rs19.48 trillion ($276 billion) in FY2020.
With 70% of Indian rural households dependent primarily on agriculture for their livelihood, the government is also aiming to double farmers’ incomes by 2022. To ensure more money goes into the hands of farmers, the government along with BFSI enterprises, are working out modalities where financial institutions can lend or insure crops smartly using technology-empowered tools.
From vanilla based lending to the agricultural sector, BFSIs are now embracing digital disruption to work as partners in collaboration at the farm level. Here is a look at the technology roadmap in the Indian agricultural space that can future-proof the agri business for all stakeholders, including farmers, lenders, insurers, and BFSI at large.
DATA ANALYTICS AND AGRICULTURE
The majority of experts including Prime Minister Narendra Modi have emphasized the use of analytics and its future role in the agri sector. So, while using technologically advanced tools like AI and smart supply chain management is largely seen as starting a roadmap for the agricultural sector at large, the possibility of smarter solutions is endless. Data is the new gold or the new oil but is also very much the new fertilizer when it comes to the tech-agri world.
Data helps a lot in decision making and that is what makes it special, acknowledges Anilkumar SG, Founder & CEO of Samunnati Financial Intermediation & Services. “Having spent more than 28 years in banking and rural agri space, information was always available but not in the required format,” says he, adding the use of data analytics has changed and has paved the way for smarter and more efficient decision making. He adds: “The strides that we are making in technology and creating smarter data will only make more and more products possible in reaching out to the unreached segments in the agri-space.”
Cropin Technology is an AI and data led platform. Its founder CEO Krishna Kumar, an agri-technology expert, explains how the company has always believed every farm to be a factory where there is production, risk, ROI, etc. “This mindset along with the use of smart data and data analytics has helped the company to offer innovative solutions to reach out to more farmers across various states. “Data has been very opaque in the agri-ecosystem but it wasn’t flowing due to its asymmetric nature,” he says and maintains that what has been restricting the capital flow is this lack of symmetric data availability for lenders to lend to ensure a smooth capital flow.
Data has helped the agri-ecosystem to move from opacity to more transparency across the spectrum – from banks to supply chain companies to agri-traders. Krishna Kumar feels the future lies in building the capability to predict every pixel on the farm irrespective of the farmers. “For example, can we predict that in this 10×10 meter farm what would be the likely yield of the current crops and what will be the risk-taking into account what happened in the last 3 years? The use of smart data is what makes all these possibilities a reality,” he says.
Adding in a banker’s perspective on how data and data analytics will be driving the agri-ecosystem of the future, Raul Rebello, Head – Rural Lending and Finance at Axis Bank, points out that data is ensuring that agri-lending moves from pure vanilla KCC lending to something that actually provides value to the agri plug-in chain with lending across various facets of the agri-chain.
Echoing the same sentiment as Kumar, he feels a big damper in the agri lending has been the opaqueness with limited bureau data of the farmer. “Data is bridging this gap moving from opaqueness to transparency in terms of getting bureau data of farmers, data on crop health, etc. Lenders have moved from being a one-trick horse using KCC to exploring smarter facets of lending, all thanks to data,” he elaborates.
DATA & DISASTER MANAGEMENT
It is not just lending and borrowing space in the agri-ecosystem that has benefited with a smarter use of data. A SIGNIFICANT impact of data has been towards mitigating agri disaster management. Tracing a real case scenario in the 2018 Kerala floods, Dr. Sekhar Lukose Kuriakose, Member Secretary of Kerala State Disaster Management Authority, discusses how the Authority ensured that farmers got adequate relief assistance as per the national disaster response fund norms. “Kerala has been very progressive in the adoption of technology in various fronts. So, while farmlands may not be as modernized as in other states, providing localized technology at a cheap cost is the challenge,” he adds.
To offer precision farming based on smarter data, the Government of Kerala is working with various agri tech experts like IBM to offer local precision-based technologies that can work best as per Kerala’s agri business model. He also shared how the government of Kerala was now offering agri economic zone with local prescriptions educating farmers on most suitable crops for the region. Eventually, technology was used at granular levels – panchayat level and field level to a farm level – all eventually helping in short to long term disaster management, says Dr Sekhar.
INNOVATIONS & CHALLENGES
While the use of data and smarter analytics offers endless advantages and future possibilities, farmers and governments at the ground level always seek technologies that are cheap, accurate and cost effective. This remains one of the bigger ongoing challenges for agro tech ventures.
On future challenges and using technology innovatively in the farming sector at large, Himanshu Goyal, Head of IBM Weather Business India, describes how the company started by predicting rainfall accurately along with volume of water up to a 500 square meter level, attaining accuracy level between 70% and 90%. For a majority of its B2B clients, including agricultural insurance companies and banks, the next challenge is to work on crop sensitive predictions all requiring unique variables of rains, wind speed, etc. “Data is getting to be to a point where it can be trustable. Add to it smarter technology and governmental support, and the future of agro-tech is exciting indeed,” he says.
BEYOND OBLIGATIONS
Agro lending has traditionally been considered more of an obligation-oriented exercise with limited scope to expand profitably or to innovate. With agro-ecosystem innovating with smarter data tools, lenders, including BFSIs, are following suit.
Agreeing that agro lending was traditionally a challenge, especially for metropolitan banks with limited reach, Raul Rebello of Axis Bank feels the times have now changed. He shares how over the years banks have realized agriculture to be a time-sensitive industry requiring manpower and other variables. They have also realized agro lending has its own dynamics and it cannot be based on urban lending dynamics. This is what has helped banks to offer a more partner-oriented role to agriculturists rather than just obligation-based lending to fulfill government norms.
The role of JAM (Jandhan, Aadhaar, and Mobile) has also helped banks and other lenders to offer increased lending in the agro-space offering a more conducive environment. All such measures have led to a situation where the cost of delivery for banks has reduced thereby leading to higher lending in the agri space and eventually higher ROI for lenders, observes Raul.
Banks making an effort to understand the rural customer better, the JAM trinity coming together and use of smart data analytics all collectively are ensuring rural lending in a more streamlined way today than mere obligation-based lending of the past. What this has also done is to ensure that banks are looking at agri loan customers from a more holistic point of view-enhancing the overall financial lending landscape, says the experienced rural banker in Raul.
On the role of value chain proposition, mitigating the risk of the borrower using tech enablers is what is driving many NBFCs to offer lending in the agri space, believes Anilkumar SG. This change in risk management philosophy is something which augers well for the sector in the future as tech enabled solutions get more refined, he says.
INSURANCE & RISK MITIGATION
Creating a risk-free ecosystem is a definite game changer when it comes to more money being offered by lenders and BFSIs in the agri space. Surya Swaroop Saxena, CIO of Agricultural Insurance Company of India, points out how having in house product-centric schemes using technology is helping farmers and lenders cover their risk substantially. Future technologies like use of drones for real-time assessment are another step, he believes, will add value to farmers while offering risk mitigation to lenders and BFSIs.
Agri ecosystem with its multi-faceted collaboration, using more tech enablers and data mitigation collectively ensures technology is indeed future-proofing the agri world at large.
