In this excellent conversation with Future Startup’s Ruhul Kader, iFarmer co-founder and CEO, Fahad Ifaz, shares about the latest developments at the leading agri-tech company post our conversation about a year ago and its recent funding round.
We cover iFarmer’s growth, evolving operation and business model, expansion, strategic ambition, and growth plans and priorities for 2021.
It has already been a year since we last spoke. At the time, you had around 1200 farmers to whom you facilitated around BDT 4 crore in farm investment in about 11 months from a few hundred investors. A lot has happened in the last year. A once-in-a-hundred-year pandemic. You have raised a new round of investment. Where are you now regarding those numbers? Could you give us an overview of a sort?
The number of farmers we work with has increased significantly in the last year. Till December 2020, we have about 8000 farmers who work with us. We've facilitated $4.2 million in farm investment which is equivalent to tk. 34-35 crore.
That is remarkable growth. More so if you take the disruption by the coronavirus pandemic into account. What are some of the things that have contributed to that growth?
We faced some challenges in the early days of the pandemic, between April-May, as we did not know what would happen and our customers also suffered from uncertainty and fear. We quickly rebounded and have since experienced an excellent, five to six times, growth.
The growth reflects in all areas of our operation. We work with a larger number of farmers. We have more farms. Our farm investment has grown many times. Our annual revenue has also grown significantly from $35,000 in 2019 to $1.2 million by the end of 2020.
Several forces helped us in achieving this growth. The market dynamics such as people are looking for better investment opportunities where they could earn better returns apart from the traditional options such as banks and similar investment products, -- an already growing trend which the coronavirus pandemic has helped accelerate. Since we offer a credible investment opportunity, which is secure as well as offer excellent return for retail investors, many people have shown increased interest in our product.
The coronavirus pandemic has put agriculture prominently into the minds of people. People have come to realize the importance and the antifragility of agriculture. Many people who were skeptical before suddenly realized that agriculture is not only a secure investment option, it is also a consistently profitable one. These market dynamics have contributed to our growth.
We have launched a number of new initiatives. We have added two new aspects to our business model in 2020: we have gotten deeper into the supply chain. We had a plan to build a supply chain business in 2021. But in the middle of 2020, we came to see that our farmers struggle to sell their products and often don’t get the right price. It is critical for our own sake that our farmers get the right price. If any part of our supply chain doesn’t work, then everything falls apart. Because if farmers don’t make money, we don’t make money either because our commission depends on their success and our farm investors don’t get the expected return.
We used this problem as an opportunity and launched our supply chain business to help farmers with market access which created a lot of opportunities for our business. We have built a B2B business where we supply agricultural products such as vegetables, meat, and other fresh produce from our farmers to business customers in Dhaka and a few other markets in Bangladesh.
We have also started working with agriculture input companies where we help our farmers access high-quality inputs. We started working with inputs from August 2020. We have partnered with input companies and started supplying inputs directly to the farmers. Since we don’t provide cash and instead provide inputs, now we have added inputs such as seeds and other related inputs with our packages.
Before we would launch one firm a month. Now we launch 6-7 firms a month. It means more investment opportunities and we can reach out to more people.
We have an app for investors both for android and iOS making it easier for investors to invest through the app and getting all the updates on the dashboard of the app. It has made it easier for our retail investors to invest and has increased our credibility.
Your B2B agriculture supply chain business is straightforward, you make money on margins. How does your partnership with input companies work?
In agriculture, input companies sell their products to retailers at a 50-60% credit. It usually takes them around six months to a year to get paid. Our value proposition to the input companies was clear. They sell their products to us at the trade price and we supply that to the farmers at MRP. We give them the money for the products right away. We could do that because when we fund farmers we basically provide them inputs, so we keep the product price and can pay input companies upfront.
As we are working with a large number of farmers, many companies are interested in working with us.
Have you done anything differently in terms of reaching out to people?
We have introduced a referral program where our existing investors can refer us to someone from their network and get discounts. That has worked well for us.
We have invested in digital marketing. We have received a bit of attention from both online and offline publications which have helped us to reach more people.
Have you done anything else for driving the growth?
The app has helped a lot in terms of growth. We have proved to be a trustworthy, credible entity in the market as we are transparent about our work and keep our investors updated. We send regular updates to people who are not our investors through newsletters.
In nutshell, I think trust and credibility is the main reason behind our growth.
When we spoke the last time, we were just a year old company. Now we are a two years old company. Initially, people were skeptical about whether we are real or will go away with people’s money. But eventually, people have come to see that we are a reliable organization and they could invest with us.
iFarmer works with retail investors who invest in farms and with farmers who receive farm investment in the form of inputs. You have also been working with financial institutions, which can provide loans to farmers you work with using the data you collect. You have a supply chain business on two ends: B2B farm products business where you work with businesses to give farmers direct access to the market, and input companies to build an input distribution business. You have a b2b business where you buy products from farmers and sell that to the businesses such as Chaldal, Bengal Meat, and others. Could you give us an overview of the evolution and how these different moving parts of iFarmer interact with each other?
In a way, these are both moving parts and not-so-moving parts. We finance farmers which is the core of our business, where we work with retail investors who invest in farms through us. We are now intervening with the input part, as well where we are working with input companies to provide access to inputs to our farmers.
Input companies face some challenges when it comes to selling their inputs, as I explained earlier. Similarly, farmers do not get quality inputs all the time. We are now bridging the gap between these parties.
Our supply chain business is a natural development of our mission and critical for our work with both farmers and retail investors. Often farmers don’t get the right price when they rely on traditional middle-men reliant supply chains for selling their products. When farmers don’t earn their best, it affects the return of our retail farm investors and our commission. We have launched our B2B supply chain business to ensure that our farmers get the best price for their products. It ensures a good return for our retail investors as well.
For financial institutions, it is challenging to invest in agriculture because traditionally these organizations are not equipped to assess the creditworthiness of farmers. Since we collect data of our farmers, we have been able to build a credit scoring system for our farmers, which financial institutions can use to assess and give loans. It makes it easier and secure for financial institutions to invest in agriculture and farming.
We have been in conversation with a few financial institutions. Hopefully, we will sign up with two banks this month. For banks, financing the farmers is costly if they do it in-house. Banks will finance farmers through us and they will use our data to decide who they will finance. It makes it efficient for them and opens new doors of opportunities.
Since you are providing data to the banks and giving them the opportunity to finance farmers through you, how will the whole system work? What will you get from this deal?
We will get into a revenue-sharing model with the banks. We collect extensive data from the market of our farmers, using which we can create reliable credit scoring of our farmers.
The last time we spoke you explained data is the core of iFarmer and you collect some 40 data points from each farmer that helps you to predict the outcomes as well as their socio-economic behavior. Last year, you signed a collaboration agreement with a Singaporean company to use blockchain.
We have already started a field trial of the blockchain. We are kind of testing the model. The blockchain is mainly for the cattle market and we want to see how it works. Once we have the result for our trial run, we will see how we can expand the application.
We continue to collect a broad range of data of our farmers and their farms, which we can use to generate a score for each farmer. We have launched an app for farmer tracking. Using these data points, banks can identify to whom they will give loans.
You have expanded your supply chain business, which started with giving farmers access to the market through developing a B2B business where you supply fresh farm produce to B2B companies. You are now working with input companies. The supply chain is complex and involves many operational issues. Could you give us an insight into your supply chain operation?
We are building small collection centers where farmers supply their products or we accumulate products. We have a central warehouse in Savar where we then bring the products. We are in the process of building partnerships for cold storage. Because without cold storage support you can’t deal with a lot of fresh farm products such as fish. Farmers bring their products to our collection center. From collection centers, we bring to our central warehouse, and then products are being sent to our customers in Dhaka and Sylhet.
We don’t have our logistics. We have partnered up with Truck Lagbe for logistics support. They do the deliveries to our customers from our warehouses. We don’t handle logistics for farmers to send products to our collection center or warehouse. It is carried out by the farmers.
We have set up some micro warehouses where input companies supply their products. From there the inputs get distributed.
You have now two operations. One is financing farmers and another is the supply chain. These are distinct operations. What kind of challenges do you see in the coming days as your business on both ends grows?
The supply chain is a complex operation and there are many issues. But we have experienced that it is getting streamlined as we move deeper into things. We do have challenges regarding logistics.
We do not have any challenges in terms of inputs, as input companies control that part.
For the products farmers bring, logistics remain a challenge. For fish and similar products, we need cold chains. We do have some challenges regarding logistics and warehousing.
You were a company of about 12 people the last time we spoke. How big is your team now?
We are a team of about 46 people now and growing.
How well are you doing in terms of profitability and revenue?
As I have mentioned earlier, we have crossed a million US dollar revenue last year.
In terms of profitability, it is too early to say because we are a fast-growing company and exploring on a number of fronts. But we are on the track of becoming a profitable business by the second or third quarter of 2021.
You partnered with an African company called Hello Tractor last year.
We have partnered up with them for agro machinery and we are researching that. The problem with agro machinery, unlike cattle or crops, the farmers can not sell the tractors. They will rent them. So we are working on this. The reason we have partnered up with Hello Tractor is they have the technology to track the tractors that will help us to collect data about the usage of the tractor. We will use this technology to find out how the investor return model will be.
Hello Tractor has developed a technology like Uber. But first, we need to make sure the number of agro machinery and as the demand for machinery in farming is growing, we want to utilize it as an opportunity.
What are some of your priorities for 2021?
We are working with 8000 farmers. We want to grow the number three times, which is 24000 farmers by the end of this year.
Last time we spoke we were mostly working in the North Bengal region. We are now in 10 districts and expanding our operation to the south. We are working in Jessor, Khulna, and Chittagong. We plan to further expand our operation geographically. Overall, the scale is a priority this year. We want to scale every part of our business.
We do have a target to go for raising Series A by the end of 2021. We are sorting the paperwork now. So raising money is a goal towards the end of the year.
This year we are focusing on IoT-based precision agriculture. We are making some key hires which we will announce soon. You know that we give advisory service to the farmers and we are planning to streamline it and offer more accurate and advanced services. This is a complex system and needs customization. We will not be able to provide the service to all farmers in the beginning though. We have made an IoT team and this year we are planning to invest more in that team so that we can start building products for farmers such as crop analytics, weather analytics, etc through which we will be able to provide advisory service to the farmers on a regular basis.
We currently have a hotline for farmers. When farmers call us to get advice for any issue regarding farming the advisors working in the back end give them an immediate suggestion. The suggestion is given based on the description given by the farmer. So can not tell if what the farmer is saying is right or wrong. But if we build a satellite and IoT-based system for that we will be able to give accurate suggestions.
Update 01 on March 9 at 7:20 pm: The article has been updated with new information re: total farm investment iFarmer has facilitated.
Interview and edits by Ruhul Kader, transcription by Tithi Chowdhury