Approach and Methodology

In other usual forms of agri finance, whether internal financing within the value chain, such as traditional trader credit, or financing originating externally, such as banking finance, MFI lending etc, the view of the overall activity that the borrower is engaged in, is less comprehensive, and therefore encompasses significant risk. The additional risk is due in large part to uncertainty, not being able to fully understand the risks and consequently not being able to assess and mitigate against those risks. Under Samunnati‘s Value Chain Finance approach the decisions about financing are based on the health of the entire value chain, including market demand, and not just on the financial health of the individual borrower. This means that in order to offer value chain-based finance, knowledge of the agricultural system is required. In general, Samunnati caters to the following needs of different value chain actors:

Input suppliers – providers of feeds, fertilizers, chemicals, agri equipment etc. Samunnati provides them with small, short-term loans for working capital: and long term, Term-loans to expand business. Through its financial relationships with farmers, Samunnati creates compatible incentives for farmers to buy from empanelled input suppliers thereby mitigating the business risks of suppliers.

Farmers – Farmers, producers and their families manage the crops or animals, and are involved in sowing to post-harvesting activities including marketing.

For Agri-farmers specifically, a lot of pre-harvest risks can be taken care of by seeking group guarantees or third party guarantees, and by say, making equipment available through leasing or asset finance. Using these mechanisms, Samunnati finances the working capital to buy seeds and other inputs and asset loans to buy equipment.

Traders play an important market linkage role. They buy produce from the farmers or co-ops and aggregate them before selling them to procurers, processors and marketing firms. Samunnati through financial intermediation will assist traders to manage their working capital flow. It will also provide traders access to finance to invest in assets that allow traders to aggregate and store.

Processors/ Aggregators who buy products in bulk from farmers or traders, are provided working capital loans to allow them to buy the produce. Through Samunnati, these processors/aggregators can pay farmers and traders electronically. Samunnati through its customized produce solutions helps , processors/aggregators to invest in or lease out processing equipment.