BOB Financial Solutions Limited (BFSL), a wholly-owned subsidiary of Bank of Baroda (BoB) and CreditAI Fintech (CAI), a farmer digitisation and credit scoring company have extended their ‘Unnati’ co-branded farmer credit card by its regional launch in Bengaluru recently.
This launch is intended to reach farmers across the southern region of India including Karnataka, Andhra Pradesh, Telangana, Kerala and Tamil Nadu. Over 100 farmer producer organisations (FPOs), farmers, promoting organisations and resources institutions from these states were present on the occasion of the launch of the card. Unnati farmer credit cards were distributed to the farmers belonging to various FPOs on this occasion.
Speaking at the launch, Niraj Kumar Verma, Chief General Manager, National Bank for Agriculture and Rural Development (NABARD) highlighted the benefits of Unnati credit cards to FPOs and farmers. “Farmer is most benefited with Unnati card, as it provides 50 days interest-free loan to farmers to help them purchase agricultural inputs at any time during the cultivation cycle. FPOs get more farmer members at their FPO input shop. Turnover of the FPOs increases multi-fold as the business is assured from the farmers with FPOs,” Verma said.
“NABARD shall provide a platform to help Unnati framer credit card reach as many farmer producer organisations across Karnataka,” he added.
Dr Venkatesh MV (IAS), Commissioner – Watershed, Government of Karnataka said, “Unnati credit card will empower farmers to avail agricultural inputs in time and at any time during the cultivation cycle. Farmer producer organisations (FPOs) should further help farmers understand and help them avail benefits of this card. As Unnati credit card works in a ‘closed-loop system’ – misuse of the loan amounts can be controlled.” Dr Venkatesh further appealed to Bank of Baroda team to further reduce the interest rates and increase the term of repayments as it can further help a larger number of farmers to be part of the card system.
Underlining the collaboration with CreditAI and services offered by the Unnati card, Shailendra Singh, Chief General Manager, BOB Financial Solutions said, “We are excited to partner with CreditAI, a fintech in the agricultural space. CreditAI is doing commendable work in bringing technology closer to the farmers through the FPOs’ networks. The Unnati credit card will bring seamless access to credit to farmers, as per the requirements of the farmers’ cultivation cycles. To ensure that the farmers, many of whom will be new to digital or cashless credit, are protected from misuse of their credit cards, Unnati will run as a closed-loop programme and the card can only be used for agriculture-related inputs from the respective FPO network.”
“We thank CreditAI for coming up with this innovative idea and being involved across the entire customer lifecycle, from identification to on-boarding to customer education and overseeing repayment. BFSL has offered a very low rate of interest to enable farmers to purchase inputs at the right time for their farming needs which results in greater income and better lives for their families, Singh further said.
“We believe that all the above measures will help in the adaptation of cashless credit among the farmers and this programme will create another example of forward-looking tech-enabled interventions for Bharat. We are very excited and hopeful about this unique programme targeted at the overall progress or Unnati of farmers,” Singh added.
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Speaking about the challenges in repayments from farmers, Sangram Nayaka, CEO, CreditAI said “Indian agri sector is in a phase where it is ready to adopt innovations not only in the way cultivation is done using farm mechanisation and automation or sale of produce online, but also in the way, farmers are now banking and accessing credit through digital platforms. As crop loans today are in the form of cash, the loans go untraced once disbursed and have a high potential for misuse by the farmers. Therefore, ‘Cash is the culprit’ in the lending system. Farmers’ ‘unwillingness to repay loans’ is the biggest challenge for banks and NBFCs in the agri retail lending space today since farmers would rather wait for waivers versus making repayments in time. The very reason penetration of digital lending and innovative products has not scaled in the agri sector versus lending to the urban sector.’
Highlighting the solutions to these challenges, Nayaka said, “To overcome these challenges, CreditAI has designed a ‘secure closed-loop cashless network’ to ensure financial institutions can seamlessly deploy credit using CreditAI’s unique platforms. Through the use of CreditAI’s unique technology platform, multiple points of variable data are captured, creating transparency about smallholder farmers who were previously unknown to accredited lenders. This provides better access to lenders and increased repayment rates, which equates to higher income for the farmers. The platform also provides a huge potential for FPOs to facilitate credit purchase of input and sale of harvest. CreditAI is the integral platform that enables farmers and FPOs to access institutional credit while offering the lenders greater oversight and control of their loans. Together with BFSL, CreditAI has created Unnati, the ‘co-branded closed-loop credit card for farmers’ making agri credit more accessible to farmers who make up 60 per cent of India’s rural households.”
CreditAI’s proprietary mobile app and agricultural input shop management system ensure that the end-use of credit is primarily for the purchase of goods at FPO owned input sales shops. The Unnati credit card is uniquely designed to allow farmers to use credit on a rotation basis so that it avoids delays in renewals. Initially, a base credit limit will be provided and over time, once the farmers’ credit profile improves with more transactions and repayments, the limit could be increased based on the farmers’ personal credit score and their actual cultivation needs. The card carries one of the lowest interest rates, should the farmer cardholder need to revolve and aims to stem out systemic lack of affordable funding for unbanked farmers.
CreditAI’s success in developing its technology would not have been possible without the investment and support from The Yield Lab Asia Pacific. Claire Pribula, Co-founder and Managing Director, The Yield Lab Asia Pacific said, “We are pleased to have been able to provide the necessary early-stage venture capital, and relevant seasoned subject matter expertise to support CreditAI’s journey through to commercialisation. Smallholder farmers provide 80 per cent of the world’s produce, their survival and increased productivity is critical to have enough affordable food for all. This rollout with Bank of Baroda is an important first step towards helping smallholder farmers to produce more sustainably.”
“The 5-year outlook of CreditAI’s innovative platform supporting the lending value chain for the smallholders in India is projected to result in: 3.3m farms digitised, 2.5m loans valuing $1.6B USD dispersed, reducing farmers existing borrowing rates by 12-18 per cent, eliminating $650M USD in debt, and positively impacting 16.5M family members. This highly scalable impact is the reason The Yield Lab Asia Pacific invested in CreditAI. We salute Sangram Nayaka and his team for reaching this important first milestone with the joint BoB Financial Solution’s Unnati farmer credit card launch,” Pribula added.