Working in the agri division of a leading private sector bank, Prasanna Rao had a ringside view of the inequities besetting agricultural finance in India. He observed that a majority of the loans were going to large agri traders located in major markets, where only a small portion of India’s grain production found space.

“The rest of the produce, nearly two-third of India’s total grain production, was near the farm gate and belonged to small traders and farmers,” Rao explains. 

Seeing these smaller players, including farmer organisations, falling through the cracks in the financial ecosystem inspired him to launch Arya.ag.

The fintech platform’s business model aims to address the multifarious challenges in the Indian agriculture sector.

The company began by turning many of these challenges into opportunities. For instance, Arya.ag today aggregates and stores about 3 per cent of India’s total grain production, valued at approximately $3 billion. “We enable loans worth $1.5 billion using the same produce as collateral,” Rao says. The model not only provides farmers with timely credit but also prevents them from selling their produce at distressed prices. The aggregated commodities include wheat, rice, maize, pulses, oilseeds, and spices.

Convenience factor

“The first solution we offered was storage at the farm gate,” Rao says, explaining that this averted the need for farmers to travel long distances to store their produce. To complete the solution, Arya.ag embedded a layer of finance. “Farmers can store their produce and, within five minutes, access a loan against it,” he says. 

When market conditions improve, the platform facilitates the sale of the stored produce to a network of buyers, enabling farmers to secure better prices. “These services have resulted in a 15-40 per cent annual increase in farmer incomes,” Rao says.

Additionally, Arya.ag has maintained a near zero non-performing asset (NPA) rate on loans disbursed through the platform. Over the years, it has facilitated $600 million worth of transactions between farmers and buyers nationwide.

Scaling up

On the challenges involved in scaling up the model, Rao points to the small ticket size of the loans. “Your business model must be able to accommodate ₹5 lakh loans while remaining scalable and profitable,” he says.

Currently Arya.ag covers nearly 60 per cent of the districts in the country and has raised about $90 million in equity funding. It deals with about seven lakh farmers and 650 farmer producer organisations (FPOs). 

The company plans to deepen its presence in the districts, aiming to engage with nearly 20 lakh farmers in the near term. The idea, Rao says, is to increase the platform’s ambit from 3 per cent of India’s grain production to 7–8 per cent within three years.