Chennai Start-up Rooting for Agricultural Lending has Caught the Attention of the Dutch

Samunnati, a Chennai-based start-up that was recently featured in Entrepreneur India's "50 Start-ups to Look Out for in 2019!" has gone a notch higher. It has reportedly raised $5 million from Dutch Development Bank, FMO through the issuance of non-convertible debentures (NCDs). A new era of agricultural lending is approaching that is about to change the entire ecosystem of India's one of the riskiest sectors.

Samunnati is a regulated Non-Banking Finance Company (NBFC) that was founded in 2014. It is spearheading the cause of financial upliftment of farmers along with its fully owned subsidiary; Samunnati Agro Solutions both of which aim to enhance the efficiency of Agri value chains by providing financial intermediation, market linkages, advisory and trade services.

Through value chain finance model, Samunnati is providing affordable and customized financial products offerings such as working capital loans to Community Based Organisations (CBO) and receivable finance to Agri SMEs respectively.

Entrepreneur India's Bhavya Kaushal interacts with Samunnati's CEO, Anil Kumar on expansion plans and much more.

This is a big move. India's start-ups have been getting global attention. Even the likes of SoftBank are investing in Indian start-ups. The latest to join the bandwagon is Samunnati. Kumar is very clear with respect to where the funds will go and how he plans to utilize and expand, "The funds will be utilised to finance the working capital requirements of our Community-Based Organisations on the supply side and Agri Enterprises on the Demand side of our Value Chain Finance model."

Solving the Problems of Ecosystem

The development bank of the Netherlands showing faith in the Indian enterprise is a matter of pride but responsibility as well. The nation's farmers have been sweltering in the heat of debts. Living a debt-ridden life is a predicament no one wants to be an owner of. Perhaps this initiative by Samunnati can help in erasing the sorrow of many lives and easing the situations of many indebt victims in India.

Kumar is aware of the problems in the ecosystem and he, through his business, aims to eradicate just that. Traditionally, informal sources have been the main source of finance for agriculture value chains whose needs are generally too large for microfinance, but too small for commercial banks. This combined with the absence of product customization to suit the cyclical requirements of the Agri value chain players, creates a gap that hampers growth and limits agricultural development. It is this problem that Kumar is eyeing to solve.

He wants to approach lending to the agriculture space as an "internal player" of the value chain. "This entails working with our customers in providing them customized lending solutions coupled with enabling market linkages."

Pressing Forward with Confidence

He has immense faith in his business model and it is this confidence that has helped him bag such a successful round of funding. So what is the single biggest aspect that can convince investors? "A unique model coupled with demonstrated execution capability is a powerful aspect to convince investors. It worked for us quite well."

Currently, their reach is within 5 sectors. They plan to expand, touch, reach and conquer the deeper shores of this industry. So whether it is livestock, inputs, commodities, food processing, Samunnati is determined to monstrously expand and spread. "Specifically, we are rooting for inputs such as seeds, fertilizers, agrochemicals, machinery and farm equipment, small and micro-irrigation," he says at last before signing off.

Anil Kumar is right when he says that agricultural lending is not as risky as it is made out to be. It all boils down to how specifically structured the products and services are. Who will establish this structure? We might watch out in the coming times!