Page Comparison

1) Cash transfer: This could be conditional or unconditional. Give money to farmer orgs and they spend on whatever assets they want

• Simple

• Demonstrating trust to FOs builds their agency

• No repayment issues for FOO

• Not possible in India due to FCRA, could try in Ethiopia or Kenya

• Money could be mis-spent

• GiveDirectly

2) Paygo: DG buys the asset and makes it available to FPO on a rental basis with a path to eventually transferring over

• Simple for FPO

• DG (or whatever entity is providing the service) can provide favorable rental + transfer terms to FPOs to increase access

• DG could aggregate purchasing volume and drive volume discounts with suppliers

• DG will have a bunch of assets on its balance sheet

• Operationally complicated

• Lots of examples with solar systems but these are usually for individuals, not collectives

3) FO Venture or Mezz Debt: Sits between equity (member contribution) and normal bank debt (working capital and term loans). No fixed repayment rate, investor return varies based on FO earnings.

Can create a blended structure where more senior / risk averse lenders get repaid first and more impact oriented investors (philanthropies, impact investors) are paid last. This could be a fund or issue a green bond organized around this theme

• Seems like a missing piece in the capital stack

• Flexible repayment terms

• Totally new instrument with uncertain risk / return profile; will investors sign up for this

• Complicated to monitor and collect cash

• Revenue share convertible note (3x return paid through cooperative earnings from Start.coop)

4) P2P Loan: Retail investors directly support FOs by offering capital at preferential terms in exchange for impact outcomes 

• There is now an established regulatory structure for this and some proven demand

• Limits on borrowing amounts / number of funders which could be an issue

RangDe

Can test by signing up as an impact partner and listing FO as a borrower on RD

5) Become a banking correspondent for an existing bank or NBFC

• There are lots of banks with huge balance sheets which need help meeting their PSL targets

• Eventually, FOs will need to engage with formal credit systems

• Need a RBI regulated partner (NBFC or bank) to pull this off; they have their own challenges (high cost of capital for NBFC, high transaction costs and slow moving for traditional banks)

• Usually a fixed repayment schedule which is not FO friendly

• Conservative underwriting criteria; maybe DG can address through loan guarantees but they will move slow

Dvara