An­a­lyt­ics for Farm Pros­per­ity ..................

How can banks lend to farm­ers in a cost-ef­fec­tive and risk-free man­ner was the topic of dis­cus­sion at a con­fer­ence or­ga­nized by Bank­ing Fron­tiers re­cently:

Banking Frontiers - - Contents -

Agri­cul­tur­ists ap­pear to have re­ally come a long way in un­der­stand­ing the science be­hind bet­ter­ing their pro­duc­tiv­ity by com­bin­ing the fac­tors of soil, sun­light, rain­fall, seeds, fer­til­iz­ers, pes­ti­cides, prices of in­puts, prices of out­puts, sub­sidy, trans­porta­tion, in­sur­ance, loans, etc. But, man­ag­ing this is be­com­ing in­creas­ingly dif­fi­cult. How­ever, the prob­a­bil­ity of mul­ti­ply­ing the prof­itabil­ity is higher for those who take in­formed de­ci­sions. The con­stant bot­tle­neck faced by farm­ers man­ag­ing large amounts of data poses an equally high risk to the lenders. This is where tech­nolo­gies such as weather in­tel­li­gence and geospa­tial an­a­lyt­ics come to cap­ture a wide va­ri­ety of data and gen­er­ate rec­om­men­da­tions. This anal­y­sis helps boost pro­duc­tiv­ity and prof­its and low­ers risks. To an­a­lyze this threat and op­por­tu­nity, Bank­ing Fron­tiers or­ga­nized board­room ses­sion for se­nior lead­ers in the agri busi­ness in as­so­ci­a­tion with The Weather Com­pany, an IBM Busi­ness and Switzer­land-based SatSure, a de­ci­sion in­tel­li­gence com­pany fo­cus­ing on do­mains like bank­ing, agri­cul­ture, in­sur­ance and cli­mate change. The high­lights of the dis­cus­sions:

Agri­cul­ture is one sec­tor where use of an­a­lyt­ics has been min­i­mal whereas it has played cru­cial roles in prac­ti­cally ev­ery other sec­tor, says Shri­pad Jad­hav, se­nior ex­ec­u­tive vice pres­i­dent, Agri Re­tail &

Dealer Fi­nance at Ko­tak Mahin­dra Bank.

He says land records, farm rev­enue records and ev­ery­thing else be­come a chal­lenge in agri­cul­ture lend­ing. “The ups and downs in the agri­cul­ture sec­tor have im­pacted the good farm­ers, be­cause they do not have data to prove that they sus­tained losses. Some­times, banks are not able to as­cer­tain the stress that farm­ers have un­der­gone be­cause banks do not have data for that. This is a two-way jour­ney in which both the par­ties have been im­pacted,” he said.


Agri lend­ing, says Jad­hav, is based on land records and geo­graph­i­cal lo­ca­tions. “While

ac­quir­ing cus­tomers, banks should know the cash flow of the cus­tomer based on an­a­lyzed data. Banks should know what is good for the farmer, from where he can earn enough prof­its to re­pay the bank loan. Si­t­u­a­tional and en­vi­ron­ment prob­lems are there in ev­ery sec­tor, but the is­sues with re­gard to agri­cul­ture are unique,” he added.

He men­tioned that Ko­tak Mahin­dra Bank has seen in­crease in per­for­mance in the agri port­fo­lio by mak­ing use of mo­bil­ity tech­nol­ogy - ‘ when you are near to the cus­tomer, your cost goes down’.

Jad­hav pointed out that the Ma­ha­rash­tra gov­ern­ment has taken an ini­tia­tive to pro­vide ac­cess to land records to banks. In ad­di­tion, in­for­ma­tion with re­gard to the con­di­tion of the land, wa­ter level and crops grown in the last 2 years is also avail­able to the banks through APS. If the gov­ern­ment is giv­ing sub­si­dies and sup­port for farm­ers, it helps in the work of the bank.

“The cul­ture of credit has cre­ated ma­jor prob­lem for us. For ex­am­ple, if one farmer de­faults and he gets a loan waiver, then why will other farm­ers re­pay their loan? This cul­ture of credit needs to be looked at by the reg­u­la­tor and NABARD,” says Jad­hav.

He also main­tained that banks are hand­i­capped be­cause of the lack of good num­ber of agron­o­mists and satel­lite ex­perts on their rolls. Ko­tak Mahin­dra Bank, he says, has col­lab­o­rated with tech­nol­ogy firms to de­velop agri apps and has cre­ated var­i­ous plat­forms for the ben­e­fit of farm­ers. “Today, com­pa­nies like Big­Bas­ket are di­rectly buy­ing from farm­ers, thanks to farm­ers mak­ing use of apps. The scourge of mid­dle­men is get­ting elim­i­nated in the agri­cul­ture sec­tor and this will be ben­e­fi­cial to banks and fi­nan­cial firms,” he added.


Su­nil Ku­mar, head, Prod­ucts at com­modi­ties ex­change MCX, says crop in­sur­ance comes into the pic­ture only when there is a crop fail­ure or crop less. He cited the in­stance of price vari­a­tions say­ing soy­bean is a global com­mod­ity and price fluc­tu­a­tions in the US or Brazil may im­pact the price of the com­mod­ity in In­dia too. “So, we need to look at price trends and how price risks can be mit­i­gated. In the de­vel­oped coun­tries big farm­ers have bet­ter credit rat­ing and fi­nance as com­pared to In­dia. The money re­cov­ered from crops should be profit for the farm­ers so that they can re­pay their loans,” he added.

Su­nil Ku­mar pointed out that the gov­ern­ment has al­lowed com­mod­ity ex­changes to launch de­riv­a­tive con­tracts in which farm­ers have the right to sell their pro­duce. If the farm­ers have pro­duced the right crop then they have the right to the sell them in ex­changes, but if the qual­ity of the crop is not good then the in­surer will take care of it. “This is a good pro­vi­sion in our fi­nan­cial ecosys­tem. Com­mod­ity ex­changes are try­ing for vol­ume in agri­cul­ture although there are bet­ter op­tions in prod­ucts like gold and crude oil. The agri­cul­ture sec­tor is not able to take off be­cause the sec­tor is not ready to adopt new sys­tems. It will take time for the sec­tor to in­crease its vol­ume of trad­ing in ex­changes,” he main­tained.


NABARD has floated more than 4000 farm­ers pro­duce or­ga­ni­za­tions and it is now for an an­a­lyt­ics tool to com­pile data on farm prod­ucts that are of­fered by th­ese or­ga­ni­za­tions. Suseela Chin­tala, gen­eral man­ager-OFDD at NABARD, said the bank looks at the en­tire value chain pre­har­vest and post-har­vest and as­sesses what reaches to the cus­tomers.

“We are fo­cus­ing on mak­ing Farmer Pro­ducer Or­ga­ni­za­tions, or FPOs a ro­bust credit model. We also have a sub­sidiary ‘Nabkisan’, which pro­vides credit to farm­ers and as­sesses their con­sump­tion needs and al­lied ac­tiv­i­ties. We are a na­tional im­ple­men­ta­tion en­tity for cli­mate change, and we will de­velop it into a largescale op­er­a­tion with the col­lab­o­ra­tion of the gov­ern­ment. We in­tend to in­cor­po­rate data on wa­ter re­quire­ments, stress that farm­ers un­dergo as a re­sult of lack of wa­ter, cli­mate changes as well life­style changes which will im­pact farm­ing ac­tiv­i­ties. We have cre­ated or­ga­ni­za­tions like self-help groups, child li­a­bil­ity groups and farm­ers clubs. FPOs may not have im­me­di­ate rel­e­vance, but in the com­ing 10 years banks and fi­nan­cial

ser­vices or­ga­ni­za­tions will be lend­ing to FPOs on a large scale. Ide­ally, an FPO will be a col­lec­tive of 1000 farm­ers,” says Suseela Chin­tala.


Chan­preet Singh, group EVP - Ru­ral Re­tail Bank­ing, Yes Bank, says the bank has been work­ing a tech­nol­ogy in­ter­ven­tion in the agri fi­nance seg­ment and a lot of work has been done. “We are look­ing at com­bin­ing the work done in cre­at­ing iso­lated so­lu­tions and cre­ate seam­less so­lu­tions for farmer on­board­ing. Our on­board­ing of a cus­tomer starts with vis­it­ing the cus­tomer. At pre­sent, this is a huge man­ual ex­er­cise. In the pro­posed solution, the field per­son can tag the lo­ca­tion in­for­ma­tion through a mo­bile solution. . Satel­lite data pro­vides us in­for­ma­tion about proxy mois­ture con­di­tions and crop pat­terns, and this give us con­fi­dence and helps us to rec­tify the in­for­ma­tion given by the field per­son. This def­i­nitely, im­proves the abil­ity to take de­ci­sion “he says.


Pra­teep Basu, co-founder and chief strat­egy of­fi­cer at SatSure, out­lined the ser­vices that the com­pany pro­vides in order to help fi­nan­cial ser­vices in­sti­tu­tions take in­formed de­ci­sions on lend­ing to farm­ers.

He said the dis­cus­sion is around satel­lite - how to do yield es­ti­ma­tion at the farm level which was not hap­pen­ing. “Knowl­edge e ngi neer i ng wi l l hel p com­pa­nies to un­der­stand loan cases which have been de­faulted and com­pa­nies will get lot of in­sights. The role of tech­nol­ogy is to bring about human touch el­e­ments in cus­tom­ized ser­vice plans for in­di­vid­u­als, based on the in­te­gra­tion of mul­ti­ple data points” says he.

He says SatSure pro­vides ser­vices to cre­ate bank­ing so­lu­tions that drive ef­fi­ciency through bank­ing de­ci­sions. “Today dif­fer­ent data points are avail­able on a sin­gle plat­form. Com­pa­nies have dif­fer­ent open source data en­ter­prises for feed­ing dif­fer­ent busi­ness pro­cesses. Some pro­cesses can be weather-driven, some mar­ket data-driven or as­set or port­fo­lio­driven data which needs a uni­fied data sys­tem for ef­fi­cient lend­ing de­ci­sions.” says Pra­teep Basu.

SatSure’s core ca­pac­i­ties have been set on satel­lite im­age an­a­lyt­ics. Pra­teep Basu says when one looks at a large area, not ev­ery­thing can be cov­ered by foot and the cost of op­er­a­tion in­creases. That’s where satel­lite comes into pic­ture.

“We are one of the first users of IBM graph. The en­tire point of build­ing trust­ful data is to in­crease re­siliency to­wards fi­nance,” he adds.

He says satel­lites do fa­cil­i­tate in­for­ma­tion of im­pact like weather on farm­ing prac­tices or the be­hav­ior of farm­ers. “There are road­blocks in land record man­age­ment and there is no solution avail­able to banks for th­ese road­blocks,” says he.


Prabakaran S, head - Whole­sale Agri Risk at RBL Bank feels agri busi­ness for a bank is not about an ex­cel sheet data. On the con­trary, it de­pends on how the har­vest hap­pens. In agri­cul­ture lend­ing, he says, it is not only about crops, it is also about al­lied ac­tiv­i­ties, like dairy, cat­tle, poultry and such other things. Th­ese all in­crease the ac­tual pro­duc­tiv­ity of the farm­ers. “When you pro­vide lend­ing to your cus­tomer, you should have com­plete in­for­ma­tion about the farm­ers and their lo­cal­i­ties. Cash is the big­gest pain point, there is need to chan­nel­ize cash flows,” he adds.


Ac­cord­ing to Ra­jbir Chad­dha, VP and head, Agri, Crop & Ru­ral Group, HDFC ERGO Gen­eral In­sur­ance, the data pro­vided by the

gov­ern­ment and the crop cut­ting ex­er­cises usu­ally per­tain to lower units. Hence, there was al­ways a question of am­bi­gu­ity about pric­ing. “For­tu­nately, the gov­ern­ment ini­tia­tives have im­proved many things in the last 3 years,” says he.

Crop in­sur­ance, he says, works when one has rein­sur­ance and the rein­sur­ance works only when you have data. In­sur­ance com­pa­nies are in dou­ble minds about us­ing tech­nol­ogy be­cause of the vi­a­bil­ity. “At HDFC ERGO, we have a spe­cial team that help us in data in­ter­pre­ta­tion,” says he.


Man­ish Awasthi, AGM - Ru­ral & Agri Busi­ness Depart­ment, Union Bank of In­dia, says the bank has 54 cen­tral­ized pro­cess­ing cen­ters - Union Sam­rid­dhi

Ken­dras - and th­ese cen­ters sat­isfy ev­ery need of the farm­ers like buy­ing car, fund­ing a con­struc­tion of a house or loans for agri­cul­ture. The needs of the farmer are to be un­der­stood, and it needs to be ful­filled. “Our ini­tia­tive ‘Sam­po­ran’ has all the de­tails of the farm­ers like loans availed, weather pat­terns, qual­ity of soil, etc and we are ex­pand­ing Sam­po­ran ini­tia­tive to a pan-In­dia level.

Sheel Ran­jan, AGM, Al­la­habad Bank, says the bank has re­cently in­tro­duced ‘Kisan Pra­gati Ken­dra’ and there are 43 such cen­ters now across In­dia. He says the re­quire­ment of soil test­ing re­port should be re­moved from the list of doc­u­ments needed for ap­ply­ing for sub­si­dies for farm­ers.


Pankaj Pi­pariya, Sales leader - In­dia/

South Asia, The Weather Com­pany, em­pha­sizes that there is a need for op­ti­mum in­fra­struc­ture, tech­nol­ogy pro­cesses and the right team to con­vert the noble pro­fes­sion of agri­cul­ture into a busi­ness. “We need the right kind of tech­nol­ogy that is un­bi­ased and scal­able. Today, is the era of col­lab­o­ra­tion, if you do not col­lab­o­rate you will not suc­ceed. The Weather Com­pany de­liv­ers per­son­al­ized, ac­tion­able in­sights to con­sumers and busi­nesses across the globe by com­bin­ing weather data with in­dus­try-lead­ing AI, In­ter­net of Things (IoT) and an­a­lyt­ics tech­nolo­gies. Tech­nol­ogy is a great en­abler and it is a very im­por­tant fac­tor in today’s sce­nario,” he adds.

Pi­pariya also high­lights the need to adopt the Kaizen ap­proach of con­tin­u­ous im­prove­ment in tech­nol­ogy. Today, there is a cul­tural change ap­proach, be it or­ga­ni­za­tional or busi­ness. Change could be a trans­ac­tion change or a trans­for­ma­tional change. The mid­dle­man is the big­gest as­set and knowl­edge repos­i­tory for com­pa­nies.

He fur­ther adds, “The Weather Com­pany is com­mit­ted to ad­vanc­ing the science of weather fore­cast­ing be­cause weather is pow­er­ful. With IBM Global High-Res­o­lu­tion At­mo­spheric Fore­cast­ing Sys­tem (IBM GRAF), a high-pre­ci­sion, rapidly up­dat­ing global weather model that up­dates hourly and at a 3 km res­o­lu­tion, we pro­vide a clearer pic­ture of weather ac­tiv­ity around the globe. IBM GRAF runs on IBM POWER9™ - op­ti­miz­ing its su­per com­put­ing tech­nol­ogy.”

Pankaj Pi­pariya of The Weather Com­pany

Pra­teep Basu of SatSure

Par­tic­i­pants in rapt at­ten­tion to a point be­ing made

Two of the pan­elists en­grossed in the dis­cus­sion

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