Notes from Feb 1 call w CEO Sanjay Mansabdar
“FPO stack” demo scheduled for Feb 2
Dvara serves as a BC (banking correspondent) for lenders that want to meet their Priority Sector Lending (PSL) requirements, which is a real challenge for banks
They are also a Cluster Based Business Org (CBBO) and promote / support FPO themselves
They have a digital platform for FPOs and the hook to get farmers to load data is access to credit
Three components to their “Doordrishti” platform
FPO stack: Static (eg, geo-referenced land parcels) and dynamic (crop, sowing and harvest dates) data at the farmer level, aggregated for the FPO and easy to share w input companies and buyers (sounds pretty similar to KDE). They also so some services like soil testing and the results are captured here.
Analytics stack: Layer in remote sensing and imaging data to build a credit perspective; what is the risk / reward of lending to these farmers. The output of this layer is a farmer credit score (“khet score”
Lending stack: This is the BC bit; Dvara acts as a BC for banks (PSUs, regional banks, etc) to help them build a portfolio of farmer loans to meet their PSL targets. Dvara handle various operational bits like documentation, KYC, e-sign, collections, etc.
Two main products (note, didn’t get a sense for total loan volume but Sanjay indicated huge demand from lenders and farmers for this product, will explore further in follow-up call)
Farmer loans
Initially 35-40k rupees check size; increases to 75k by third cycle
Interest rate of 23-25%
Without credit, farmer’s entire decision is driven by local trader who bundles inputs with access to credit and offtake (but at low prices), access to capital enables choice in what inputs to buy/where and where to sell
FPO loans
Still nascent as FPOs as an institution are weak (no systems or governance, poor capitalization, no credit guarantees) and lenders are wary
Dvara leans in heavily, orchestrates the entire transaction and provides a first loss guarantee
The funding is short term and transaction based. Example: Lender pays an input supplier on-behalf of an FPO who sells the inputs to its members and Dvara remits payment back to the lender
Developed an insurance product that automated the claims process via farmer photos and remote sensing but not able to get traction
For context, the PMFBY scheme charges farmers 2% of their cost of cultivation as premium and payout is super “coarse” as it based on delta of yield from 4 random sites in the region relative to historical standard; not tied to the individual farmers realization at all
Dvara’s approach was to tie the payout to the farmers actual realization which they tracked via remote sensing (if you grow paddy in x region, this is the standard yield, if you suffer, payoff based on a ratio) and imaging (farmer self-submit geo-tagged photos, track changes over time)
Dvara not able to offer this product for the 2% floor set by PMFBY (their pricing is closer to 7%) so its stalled
On equipment loans, there is interest in cold storage from FPOs that are working with perishables; for non-perishables, utilization for most equipment is just a couple times a year so not worth owning directly
Sanjay feels a pure digital business is not possible w small/marginal farmers
Dvara model is to place a “Krishak sakhi” at the FPO to ensure effective data collection for its FPO stack otherwise it just doesn’t happen
I asked if Dvara offers FPOs data portability for the info captured in FPO stack; Sanjay claims not much demand for this at the moment but in theory they are fine with it. Their beleif is that the data is useful when tightly integrated (eg, farmer info + analytics + on-ground people to help banks lends into this space)
Also, data monetization requires major scale; an you aggregate across 30 FPOs in a region and present that to an input company; individual FPO is not that interesting