At the MIT Global Challenge: http://globalchallenge.mit.edu/teams/view/206

1. AGROBALANCE
Unleashing Agricultural Productivity through Financial Inclusion
April 2011
Help us transform the lives of 500,000 small farming
households in India by 2016, by empowering them to
access markets and affordable capital (~$200 MM)
AGROBALANCE Team: Meetu Kapur, Susana Ortega-Valle, Lucinio Muñoz
Community Partner: eKutir Rural Management Services Pvt.
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2. INDIA unmet need - a large financing gap in Agriculture
CONTEXT(1) THE PROBLEM
– Stagnating Agricultural productivity, 2.5% v/s 5% potential
Small Farmers – Limited access to agri-inputs, technology and markets
No leverage to growth – ~100 MM small farmers have no access to formal credit
– Local money lender rates hover at 150%
– Mandate to lend to the Agricultural sector
• 50% of Banks cannot comply to this mandate
• $2 Bln shortfall in mandated agricultural lending “Huge financing gap due
Financial Institutions
– Cost pressure to the lack of viable
Changing Regulation • Interest Rates capped at 24% v/s 31-50%
models enabling financial
– Changing portfolio mix requirements
• Lending for income generating purposes from 25% to 75% inclusion”
SOLUTION - A TWO STEP APPROACH
What? Introduction of efficiencies in the supply chain to improve small farmers’ productivity
• cost-effective aggregation at the farmer level,
• access to quality agri-inputs
1 De-Risk the
Farmer Base
• access of markets, and
• capability building
How? ICT platform + Digitized Agri-Intelligence + Viable Business Model
What? Integrated offering also enabling Financial Institutions access farmers at lower cost by
• enabling individual farmer risk assessment,
2 Enable Farmers
Access Capital
• introducing risk mitigating tools, and
• providing monitoring capabilities
How? Farmer’s data collection + Analytics + Financial Innovation
(1) NABARD; Reserve Bank of India - Priority Sector Lending Status 2009-10; Reserve Bank of India 2011- Malegam Comittee
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(2) Community partner - eKutir, a grass root organization backed by Grameen-Intel Social Venture

3. Step 1 – De-Risk the Farmer Base
Introduction of supply chain efficiencies at the farmer level by leveraging ICT technologies
Demonstrated positive impact on productivity (farmer income) and economical viability
STEP 1: De-Risk the Farmer Base ENABLERS
FARMER ENTREPRENEUR  eAGRO System - ICT Platform & Digitized Agri-
Intelligence enabling
Farmer discusses  procurement of inputs,
problems, needs,
land status, income
 advisory services and
& expenses with the  market linkages
Entrepreneur
 Business Model - ownership at every level
 Profit shared among the entrepreneur, the farmer
The Entrepreneurs enter static
and dynamic data into the community and eKutir
Advisory services and agri- eAgro system
inputs are delivered by the
entrepreneur to the RESULTS – COMMERCIAL PILOT SINCE 2009
Farmer, the farmer pays for
these services eAgro SYSTEM
 Size and Impact
eKutir BACKEND  12 entrepreneurs, 6,000 farmer catchment area
 40 to 400% income increase per farmer
 Financials
 Entrepreneurs breakeven in 6 months
Requests are routed to  $50K+ turnover per entrepreneur
relevant players or  $5K+ entrepreneur profitability
directly answered by the  $2.4K+ profit share per entrepreneur
system
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4. Step 2 – Enabling Access to Affordable Capital + Bundled Solution
 Develop risk assessment & mitigation tools to help Banks and MFIs service small farming households
 Creation of a BUNDLED SOLUTION blending Step 1 and Step 2
STEP 2: Enable Access to Capital BUSINESS MODEL: Bundled Solution (Step 1&2)
STREAM 1 – ICT Tools Licensing (from step 1)
 Customer – Companies servicing farmers
 Contract farming agents (e.g: Global Agri Systems)
Data  NGO’s (e.g: Nageshwar Charitable Trust)
Capture  Value Proposition
 Reduction of operational costs & traceability of produce
Commodity Prices  Value Added Services (VAS) enabled for end customers
(farmers) – agri advisory services, access to credit
Crop Insurance  Revenue Model
Risk Analytics &  License fee for the use of the ICT tools
Weather Risk
Monitoring Engine  Usage fee on VAS
Management
STREAM 2 – Financial Services (from step 2)
“Portfolio of credit worthy
 Customer – Financial Institutions
customers accessible at  Banks (e.g: ICICI)
lower acquisition &  MFIs (e.g: BASIX)
servicing costs”  Value Proposition
+ Monitoring Services
 Access to new customer base
 Reduction in acquisition and servicing cost
 Regulatory compliance
 Revenue Model
 Fees to access customer data & on monitoring services
 Commission on credits disbursed
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5. Value Creation
For FARMERS (end customer) For FINANCIAL INSTITUTIONS
• Demonstrated improvement in yield (~20%) • Access to new customer base
• Demonstrated improvement in income (40-400%) • Reduction in acquisition and servicing costs (2 to 5%)
• Access to affordable capital • Regulatory compliance
STEP 2: Enable Access to Capital Regulatory
Shrinking footprint
Profitability
Farmer protection
Volume
+
Money Lenders
MFI’s
Interest Rates
Banks
-
- Access to Farmer’s Customer Base +
Access to Capital = Multiplier Effect on Agricultural Productivity
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6. Implementation Plan
6 months 12 months
Product
Gap Assessment Product Design
Development Commercial Pilot
Size & expected impact
Risk Assessment Prototype  2,000 farmers, 2 locations
 $400,000 in farmer lending
Solution Delivery  Farmer income expected to increase ~2X
• MIT Team: 10+ years experienced professionals in Financial Services & ICT
Project Team
• eKutir: 20+ years experienced professionals in Agricultural Lending
• National Bank of Agriculture and Rural Development (NABARD) in India
Strategic Partner
• World Bank Agricultural Risk Management Team
Outreach
• MIT Poverty Action Lab
• Global Agri Systems: leading contract farming player in India
Pipeline of
• Nageshwar Charitable Trust: leading NGO in credit linkages for women
Customers self -help groups in rural India
• Prototype Development ~$ 430 K
Funding Needs
• Commercial Pilot ~$800 K
~$1.3 MM funding needed to get to commercial readiness in 18 months
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