Rural lending platform Jai Kisan is giving cheap loans for farm machines

Jayant Patil grows grapes on a two-acre farm near Nashik. He had been keen on installing a drip irrigation system, which could reduce his expenditure on fertilisers, pesticides and power, and improve the quality and yield of his produce. He was planning to get a loan for the purpose, but higher interest rates of 24-40 per cent that NBFCs or informal channels charge was a deterrent.

 

Last October, Patil was finally able to install a drip irrigation system after securing a loan at only 12 per cent interest, offered by rural lending platform Jai Kisan. The start-up is able to offer a lower interest by securitising the loan with the asset (equipment), and works with equipment dealers, who share half their margin to subsidise the loan.

 

It has raised $1.5 million (Rs 10.6 crore) in funding from Blume Ventures and other investors.

 

Dealers make, on an average, 20 per cent on agri-equipment. The margin some times goes up to 30-40 per cent on products such as shade net (greenhouse). The start-up says dealers share their margin with it as that is offset by higher volumes. Dealers also play a key role in recovery, as they do in bikes, as they have to bear 10 per cent of the loss in case of a default.

 

Thanks to the use of technology, channel partners and financing, dealers are able to cater for wider geography and wider product range. They don’t have to carry an inventory; they can buy when they get an order online. Jai Kisan is able to borrow from NBFCs at 18 per cent as the loans are securitised. For the farmer, the start-up is providing access to capital, cheaper and faster – loans are disbursed within a week, and the entire process (onboarding to disbursement) is online, except for soil testing to check what he can grow and how he can repay.

 

Excluding tractors, the agri-equipment market in India is estimated at $6-8 billion, and dairy equipment is $5-9 billion while another $2-3 billion for solar equipment may open up soon. ‘‘The macro and socio-impact opportunity is huge. Otherwise, we won’t have left our private equity jobs in New York and living in villages,’’ says Arjun Ahluwalia, who co-founded Jai Kisan with American national of Filipino origin Adriel Maniego. They plan to take the model to the Philippines and other countries of southeast Asia.

 

After a pilot project to check repayment among 100 farmers in Maharashtra and the funding, the start-up plans to enter 90 locations in four states and build a loan book of Rs 28-30 crore in the next nine months. Human capital is a challenge in rural India. It has overcome this by onboarding dealers but has to get the optics right to win farmers and crack the rural supply chain.