A majority of farmers in India depend on middlemen to find buyers for their produce who take a major slice of their profits, leaving little room to negotiate prices. Globally, over 99% of agricultural transactions are cash-based, and goods distribution can be inefficient. In fact, 30% of cash crop value is lost through value chain inefficiencies, representing a $4 billion annual post-harvest food loss. The agriculture value chain is highly complex and paper-based; leading to inefficiencies, waste and fraud across the ecosystem of partners.
Digital technology can unlock much-needed efficiency and financing for small farmers as well as other stakeholders to make farming commercially sustainable. Yet, many agritech companies offer partial solutions, do not solve fundamental infrastructure challenges (for example, 51% of India’s population is offline), and operate in silos.
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Mastercard wants to make life better for the Indian farmer — get paid more and faster. The global payments and technology company’s Farm Pass platform, piloted in Kenya in 2015 and since expanded to Uganda, Tanzania and now India, brings together people from both the supply and demand sides on a digital platform. Farm Pass, running on the larger Community Pass platform, provides a digital marketplace for buyers who are looking for sustainable sources of quality produce at favourable market prices as well as small farmers looking for reliable markets and fair prices.
“In India, we have made a great start, onboarding over one million farmers in two years — across Maharashtra, Karnataka, Andhra Pradesh, and Tamil Nadu — to become a top ten digital Ag (agriculture) platform,” says Tara Nathan, executive vice-president, Community Pass, Mastercard. “Mastercard is not an agritech. Rather, we provide the technology and the network to connect an ecosystem of Ag and finance stakeholders, just like we do in our core business,” she points out.
Mastercard has now set a target of benefitting 10 million farmers by 2025. Farm Pass will soon be extended to five more states: Himachal Pradesh, Assam, Odisha, Telangana, and West Bengal.
The ground reality
According to Nathan, close to 150 million farmers are at the epicentre of a $650-billion agri and rural retail ecosystem in India. Yet the economic potential of the agricultural segment is not fully realised. Digital solutions could improve access and unlock opportunity; yet today only 3-4% of farmers regularly use digital tools because smartphone ownership and consistent internet access is low. Due to these fundamental infrastructure challenges, financial institutions as well as other private and public entities struggle to reach this segment and offer digital services that could improve the lives of small farmers and micro merchants and drive economic growth.
“I see immense opportunity for digital technologies to transform and organise India’s agricultural ecosystem. However, for these (digital technologies) to have impact at scale in farming communities, they need to be low-cost and take into account rural infrastructure challenges,” she stresses.
How the platform works
Mastercard Community Pass is an interoperable digital infrastructure designed for the rural environment – it works offline in areas of intermittent connectivity to enable a network of agriculture, micro-commerce, health and other services. “The model is inclusive, serving everyone from smallholder farmers, rural entrepreneurs, and small traders, to agritechs, as well as large corporates and banks,” says Nathan.
Across India, there are thousands of agri-tech companies operating in silos. “By connecting disparate agritechs on a common infrastructure, we are supporting their growth and providing tailwinds. And, by crowding in multiple agri-techs and other service providers to the shared Community Pass platform, we can bring down the cost to serve for everyone,” she says.
“Mastercard is bringing its core competency – safely and securely digitising transactions – to rural communities. We do this every day for nearly 3 billion consumers, and now we’re doing this for over 3 million smallholder farmers around the world.”
The benefits so far
By transacting through Farm Pass, smallholder farmers develop a financial profile that can unlock financing opportunities for working capital and inputs, enabing Mastercard’s partners to provide agricultural and financial services at a lower cost, says Nathan.
Citing an example on the platform’s success, Nathan says, “Carrot farmers working with our partners in Nilgiris have seen a 100% improvement in their income from `5.3 lakh per annum to `10.7 lakh per annum through integrated interventions across market access, inputs, credit and advisory solutions. To date, 40% of farmers on Farm Pass are active and have collectively listed 1.5 million metric tonnes of produce for sale.”
The path ahead
Farmers need instant cash, yet in India less than half of farmers have access to formal credit and rely on informal sources of credit with interest rates of 35-60%. According to Nathan, there are few scalable loan products available in the 8-18% range. Similarly, farmer producer organisations and farmer cooperatives are constrained by a lack of capital. At the same time, financial institutions are unable to meet government-mandated priority sector lending targets due to the high cost of acquisition and risk.
“By bringing the banks to the farmers and providing banks with anonymised data, Farm Pass mitigates this, and enables our financial institutional partners to realise their rural banking strategies, drive financial inclusion, and innovate agricultural credit. We have partnered with India’s largest invoice discounting portal, M1 exchange, and will be launching India’s first Ag invoice discounting platform,” Nathan says.
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One of Farm Pass’s focus areas has been supporting state governments to digitise their agricultural and rural ecosystems. “Our ‘phygital’ model creates jobs for rural entrepreneurs, thereby supporting rural livelihoods across India. We are also launching India’s first ‘offline’ financial inclusion card to enable financial and non-financial transactions in the rural sector,” she summarises.
* Farm Pass covers farmers in Andhra Pradesh, Maharashtra, Karnataka and Tamil Nadu
* Supports state governments to digitalise their agricultural and rural ecosystems
* Farmers on the platform have collectively listed 1.5 million tonnes of produce for sale
* Plans to launch India’s first ‘offline’ financial inclusion card