Agriculture is a cyclical activity. Crops are planted, grown and finally harvested. In the meantime, a farmer will usually only see money leave his farm waiting for a windfall of money after the harvest. Some farmers even have to wait several weeks after harvest to be paid. Managing that cash must be stressful, but can also be detrimental to the business if you can’t buy the products you need – think fertilizers and pesticides, but also increasingly technological tools, etc. – to manage the growing season.
The cyclical nature of the industry means that farmers, more often than not, use some sort of financing or debt to get by during those cashless months. While some markets have more developed agricultural finance options than others, most commentators would agree that more sophisticated systems are needed, and entrepreneurs are slowly but surely turning to create them.
Agro-fintech options for European farmers
In Southern and Eastern Europe, two agri-fintech startups Tarfin and Agro.Club have expanded their respective footprints to offer their financing solutions to new farmers in the region. Agro.Club is also considering expanding even further into Brazil.
These regions have large populations of small and medium farmers who are underserved and are usually forced to turn to their agricultural input suppliers for financing at exorbitant rates. According to Mehmet Memecan, founder and CEO of Turkey-based fintech startup Tarfin, “vendor financing”, as it is called, is rampant in fragmented and consolidated agricultural markets with large retail chains and farms. commercial..
“Agro-dealers step in to provide finance in addition to agricultural inputs. Vendor financing puts pressure on dealers’ cash flow and is an expensive financing solution for farmers. As most agri-dealers are forced to sell with seller financing, they lack the cash to invest in their businesses, he says APN.
Tarfin is an alternative to seller financing, offering agro-dealers and small and medium-sized farmers a quick and convenient tool to finance the sale of agricultural inputs. The Istanbul-based startup uses machine learning-based agricultural risk scoring models that draw on agricultural data and credit history. This allows Tarfin partner retailers, who provide inputs such as seeds and fertilizers, to assess farmers’ creditworthiness and offer them inputs with fairer credit terms and the ability to pay at harvest. Tarfins underwriting is automated and the business can return instantly with an approval, seamlessly integrating the financing solution with the sale of agricultural inputs. Farmers are also notified in advance of the amount of payment due at harvest, with no setup fees, service fees or deferred payment fees.
With more and more agriculture and farm data available to determine risk and train its algorithms, Tarfin was able to grow. It also did so with the help of $14 million in new funding from Syngenta Group, Yara Growth Ventures and Elevator Ventures, the venture capital arm of Raiffeisen Bank International. He had raised $5 million in a Series A round before that.
Since 2017, the agri-fintech startup has funded over 42,000 farmers and granted over $100 million in funding for the sale of agricultural inputs.
A Spanish partnership
Agro.Club is another agri-fintech startup that provides integrated financial solutions to actors in the agricultural value chain in Europe. The US-based platform is a digital sales enablement platform that helps retailers, grain companies, input manufacturers, and farmers manage their business processes efficiently.
In other markets, Agro.Club provides financing through a comprehensive B2B grain marketplace. Its algorithms not only help farmers and grain companies find the best match between supply and demand, but also perform grain quality control, know-your-customer documentation, logistics and transaction financing. .
More recently, Agro.Club partnered with Spanish bank Crealsa to offer innovative financing solutions to Spanish farmers. These include supply chain finance, transactional services and a “buy now, pay later” option.
The agri-fintech startup is also expanding into Brazil, which is in its target expansion region due to agricultural productivity; it targets North America, South America and Europe at large.
“We strongly believe in the potential and need for innovative financial solutions in agriculture, as very little progress has been made over the past 30 years,” said Egor Kirin, Founder and CEO of Agro.Club. APN.
So far, it has facilitated transactions worth over $200 million and served over 25,000 farmers around the world.
Regulations and licenses
Government policies can be one of the biggest barriers to entry for companies looking to expand into other markets. Having local bank Crealsa as a partner has helped Agro.Club with regulatory support, compliance, operational efficiency and risk management.
“We try to leverage existing strong players in each market who have already proven themselves so that we can also be efficient, provide the latest and best financial solutions and also be quick to enter the market rather than having to do everything ourselves. We really like the partnership model in general,” says Kirin.
Memecan also admits that obtaining licenses in a new market is a long process. He notes, however, that regulatory approvals can be obtained within a reasonable time frame and are not a dealbreaker when venturing into new markets.
“From the beginning, we have built these technology assets with modular technology that has already proved to be easily adaptable to the different needs of the local market,” he adds.