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Ashu Sikri (Unlicensed)

Ashu Sikri (Unlicensed)

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  • We believe a combination of advisory, investment in collective assets and data will create market ready farmer organizations who can increase member income and climate resilience.

  • We are deliberately keeping a wide in lens on what type of collective assets for now; anything with quick ROI and a clear story on income increase, climate resilience and gender empowerment is under consideration. For a longer list, see here. Not looking at working capital loans

  • Our approach is shared or collective asset ownership; others often focus on local service providers / entrepreneurs or individual members within the FPO given capacity / systems / governance issues with FPOs. Need to better understand what hasn’t worked with org level ownership from prior initiatives and design our program in a way that responds to those issues.

  • In all scenarios, assume some “skin in the game” whereby farmer orgs will need to put up some portion of the investment amount themselves (5 to 25%)

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#) [Instrument]: [Description]

Benefits

Drawbacks

Examples and other notes

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

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)

View file
nameRevenue Share Convertible Promissory Note (1).docx

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 systemsNeed a

  • Agri-Infra fund provides 3% interest subvention and credit guarantees which could motivate lenders; wonder why others have not yet been able to unlock this

  • Need to partner with an 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

Bharosa

A related model is Aceli who provides first loss guarantees and bonus payments to banks who lend to small famers / agri MSMEs / coops. NABARD and Dept of Agri play this role in India already; our value add could be coupling FLDG with capacity building / TA?