Banking Pakistan’s Agriculture and the Evolving State of Agritech, Discussion with Farmdar

No single agritech startup funding was reported in Pakistan in the whole of 2023 despite technology’s rightful promise to revolutionize the biggest industry that employs the most, feeds the most and contributes to exports the most in the face of climate change that’s worsening every day.

But there are early signs of a change, at least in sentiment!

Farmdar, the leading precision ag platform last week announced a partnership with Bank Al Falah, to financially empower farmers through its CropScan database that spans millions of acres. It will enable BAFL ‘to identify prime candidates for lending at scale and speed’, noted the press release.

The development comes with the backdrop of similar announcements, a major agribusiness expo and a year-long push by the govt for corporate farming and bringing foreign and domestic investments into the sector.

ProPakistani sat with their cofounders Muzaffar Manghi and Muhammad Bukhari to discuss Farmdar’s journey, the implications of the latest announcement and how optimistic we should be about a more positive future for agritech in the country.

Scaling the Agriculture Financing & New Partnerships

“We hear a lot about agri-financing in Pakistan but most of it is inaccurate with a lot of grey areas in how farmers get the loans. Even if a bank is genuinely interested in agriculture lending, first it faces the archaic form of documentation and second it has no way of real-time monitoring and intervention until the bank gets its money back or the farmer defaults,” stated co-founder Farmdar & Agrom AI, Muzaffar Manghi talking to ProPakistani

Talking about the partnership with BAFL, he added that first they will be sharing the pre-digitized data of the existing farmer base and who is most suitable for loans with a bank. Secondly, banks are also looking to go into remote villages where digitization has yet to begin so that’s the second area of collaboration.

Thirdly, farmers are registering with the bank where Farmdar can share their past data with the bank, what he grew over the years, how the crops performed and how he responded to challenges. They can also inform the bank ahead of time about the possible risks to crops like extreme weather, water shortage and diseases so the bank can engage farmers in a timely manner.

Manghi also revealed that Farmdar’s registration surpassed 100,000 farmers in Pakistan, and they are expecting to top 250,000 by the end of the year.

Since their website is also being upgraded, you might not get the best idea of their new and amazing product line-up. At top, they have CropScan which is a satellite-based large-scale business intelligence platform with a team of geospatial analysts, remote sensing experts, machine learning and data engineers. 

Secondly, they have AgriChain, a B2B SaaS platform for farm & crop monitoring, traceability & climate impact. a collection of mobile and web-based apps that allow agribusiness and allied industries to digitize their universe. It includes other products in the same suite that lets you monitor farm productivity, and team activities, and look at soil organic matter, moisture data and plant health monitoring.

Cofounders revealed that their yield and biomass estimation features are also live and provided a 98 percent accuracy on soybeans in Brazil while it can also estimate the yield in bags with up to 92 percent accuracy.

‘Best Agritech approach is B2B2C and not B2C’

Looking back on 2021, it felt like every farmer was going to have an app on his phone to manage his farming business, but it soon became clear to everyone that direct-to-consumer play lacked positive unit economics, maybe not to everyone.

But Farmdar was the earliest one to acknowledge it. They went to sugar mills, textile and food processors to mention a few industries that interact with farmers and found value in digitizing their value chain and farmer interactions.

“When we launched the product, it was a very farmer-focused product because we built it for our farms and that also gets a lot of traction with corporate farms like Gourmet. Sooner they put a bigger challenge in front of us for their sugar mill and that’s where we identified the opportunity of large-scale satellite-based business analytics for sugar mills,” commented co-founder and CEO Farmdar Muhammad Bukhari talking to ProPakisani

He added that their eyes are always on the farmers, but they realized that the best way to do that is B2B2C and not B2C. The foremost reason was the high acquisition cost in convincing and training the farmers on precision agriculture, but the same farmers have long-standing relationships with agribusiness companies, so they are the right channel to decimate information and influence the farmers.

He candidly revealed that while their acquisition costs for initially registering farmers were low, it increased by a margin after excluding those who were not able to draw their field boundaries despite having field teams and a customer support centre to guide them.

Muzaffar added that farmers understand the cost-benefit ratio and even learn to use the tools but then they ask if the technology is really that good, then why not everyone else in the supply chain doing it? This is a very legitimate question as far as tech adoption is concerned.

Upcoming Partnerships and ‘Healing’ the State of Agritech in Pakistan

Talking about upcoming partnerships, Manghi revealed that they will soon announce a collaboration with a leading fertilizer company and another partnership with Jaffer Brothers. He added that they will also pursue the sugar industry more aggressively since they have a market leadership in that area.

While more banks have also approached them, they are being cautious and working with only those who understand the solutions and their value.

Coming to the larger ecosystem, PAC Agri-Connections 2024 recently proved a ray of sunshine on a cloudy year for the agriculture landscape.

The coalition of leading business groups of the country organized a two-day conference and expo bringing farmers, agribusinesses, investors and agritech players under one roof that followed several partnership announcements, insightful conversations and a startup pitch competition as well.

The ecosystem we can say was ‘wounded’ by major startup bets gone wrong and a high-interest rate environment coinciding with the political and economic shakeup that damaged the investor sentiment for Pakistan, far more than it did in other countries.

Globally, Agritech startup funding dropped to $15.6 billion globally in 2023, down 50 percent from $30.5 billion in 2022 and 70 percent compared to $53 billion in 2021. Not only has it dropped to a six-year low, but it also declined as an overall portion of the global venture capital landscape.

But other countries have robust financial systems and support mechanisms to recover from these shocks, unlike Pakistan where the recent funding crunch has left everyone wondering when it will be back.

While writing this, the US Federal Reserve has just announced to keep the interest rates unchanged after inflation proves sticker so the overall funding recovery might take a bit longer than earlier anticipated.

Despite this gloomy picture, there are nearly hundred agritech startups trying to innovate their way through one of the toughest value chains in Pakistan. From farm management to vertical farming, and contract farming to more analytics players, the resilience shown by the ecosystem is unmatched.

“Agritech had never gone anywhere, and every category has wins and losses. Some companies overpromised and it did not work while others on the side of analytics are doing well. The problem does not lie with the technology or its need but in the ideas and their execution,” noted Manghi

But Manghi also said he does not think that the realization of a sustainable business model has come to the ecosystem yet since they are seeing some people making the same mistakes and overpromising on the value proposition.

Bukhari added that successive governments in Pakistan have realized that agriculture is our unfair advantage, and it can generate a lot of export revenues as well. It has resulted in an overall strong interest in the industry with both the public and private sectors on board, which has built the recent momentum we are seeing.

“We hope these tailwinds help everyone else in the agritech space as well since that’s good for us too as the ecosystem becomes product aware, new technologies emerge and the whole pie gets bigger uplifting everyone,” he added.

‘Pakistan is Our Home Market’

As you might know, Farmdar has expanded to Brazil, Morocco and Peru as well with 350 million acres of coverage in total but ‘Pakistan is our home market and largest source of revenue and growth, and it has the most potential,’ noted CEO Farmdar, Muhammad Bukhari.

He added that the only time they go to other countries is when existing multinational clients ask them to solve problems in another market. He said that they had a thesis that Pakistan is an amazing lab so if we build products here, it will resonate with everyone in the world, and they have proved that.

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