Understanding agriculture fintechs’ business models: Agri-Wallet service delivery model case study
This blog by the Mastercard Foundation Rural and Agricultural Finance Learning Lab and the Sustainable Trade Initiative (IDH) evaluated Agri-wallet’s business model and identified opportunities for Agri-wallet to scale sustainably while creating positive returns for its farmer, small and medium enterprises customers, and investors. Agri-wallet is an innovative agriculture fintech in Kenya that provides supply chain finance to insure that all actors in the value chain can access the resources they need to grow and scale. Four key learnings are: 1) By reducing the cost and risk of financing and strengthening the value chain, Agri-wallet’s digital supply chain finance model is expected to generate positive returs for its customers and its investors. 2) Buyers are the key entry and leverage point to scale Agri-wallet’s business and strenghten the value chain, but need to be selected carefully to optimize financial performance. Understanding the drivers behind buyer performance can help guide a more targeted approach to buyer acquisition, onboarding, and customer care to create a buyer mix that maximizes overall profitability. 3) Achieving financial sustainability requires Agri-wallet to continue to scale rapidly using the right capital structure to finance its operations and lending. Thereby, achieving scale also depends on the balance between local vs. foreign currency denominated debt, debt to equity ratios, and Agri-wallet’s ability to fundraise successfully and reach its customer target 4) An optimal pricing strategy will need to balance increased captial costs for Agri-wallet and returns for buyers, input providers and farmers. An optimal pricing strategy will need to take into account the returns of buyers, input providers, and farmer. This is particularly important for vulnerable clients, like smallholder farmers and small agri-SMEs, where sudden or brisk price increases could risk eroding their income gains to a level that renders Agri-wallet uncompetitive.