Tea retailers with expansion plans and tea growerstrying to finance new processing equipment, quickly discover that bankersprefer big profits over big ideas.
Venture capitalists consider theseopportunities as “unbankable” and angels are elusive, which is why entrepreneursin both the tea lands and consuming countries turn to crowdsourcing; foundationsoffering specialized “social” and “green” funds, and commercial microfinancing.
In many instances the challenge is not creditworthiness. Kiva CEO NevilleCrawley explains, “You have rich financial lives way down in the economicpyramid. It’s just not being recorded anywhere.”
Neville is pursuing a cell-phone accessiblefinancial database for the millions worldwide who lack an online identity andcredit history. “What we need to focus on is a very low-cost form of digitalidentity, and a way for all of the credit, from the quite informal to the veryformal, to be written in the same way,” he said.
The Kiva Protocol is a digital identitysystem designed to be inclusive, he said.
“We’re not looking at alternative creditscoring, but actual credit scoring. Even someone living on $2 a day, they havea couple hundred-dollar balance sheet. People are living exemplary financiallives. We’re not trying to make an alternative system, we’re trying to improveThe System,” he told Impact Alpha.
Putting Money to Work
On returning from a visit to India, where shemet women entrepreneurs who were recipients of Grameen Foundation microloans, Tasha French Lemley decided to establish a permanent Chai Wallah teacart location in Nashville, Tenn. “Face-to-face interaction between people ondifferent sides of a divide is where dramatic change happens,” said Lemley whofounded TheContributor. “My dream is to increase this interactionover great cups of tea, while providing self-sufficiency for some amazingwomen,” she said. The cart is operated by disadvantaged and homeless “and hasbeen embraced by the Indian community in Nashville—it reminds them of home andfamily,” explained Lemley.
She successfully turned to Kiva’s broad baseof small investors and investor groups for $7,000 and promptly repaid theirgenerosity.
Crystal Stokes, a mental health professional,operates FrankCommunity Farm in Henrico, Va. on Chesapeake Bay. “My teamand I decided to provide a space for adults with autism and other neurologicaldisorders to come and learn job skills in an agricultural setting. We chose anagricultural setting because it encompasses so many job skills: planting,weeding, harvesting, packaging, shipping, deliveries, customer service, eventplanning, public speaking… the list goes on.”
“Our local community is saturated with urbanfarmers and vegetables can be hard to sell at our local farmers markets. In 2018,we started wild harvesting and cultivating Yaupon Tea Trees on our property.The Yaupon tea that we harvest, and produce has really taken off and thecommunity is enjoying native local tea.” She markets the tea through a smallCSA (Community Supported Agriculture Program).
Her proposal for a$6,000 loan that returns no interest is currently 98% financed by 158 lenderswith four days to go.
Financial Assist for Small Tea Growers
Financial technology (fintech) increasingly takes intoconsideration weather and other variables that have a direct impact on thefinancial viability of agricultural ventures, including tea.
In July LaurenFulton attended the annual meeting of the U.S. League of Tea Growers.She introduced TEAvestment, a new venture to promoteinvestment in the tea industry and help tea businesses better understand theirfinancial situations.
“We offer technical support to model the operating and financing assumptions for your tea production—from seed to finished product,” says Fulton. “If you are not yet producing tea, we hope you will explore our curated articles on tea financing,” she said.
Financial models assist in planning upfrontinvestment, establish a timeline for your tea business to 'break even' andrepay its investment, and a profit forecast beyond your repayment period. Producing,harvesting, and processing models are available, she explained.
Improving Financial Literacy
It is estimated the digital payments segment in India alone will reach $500 billion by 2020, accounting for 15% of India’s gross domestic production with mobile transactions expected to double to 40%.
In tea growing regions many farmers are functionally illiterate. Empoweringlow-income women to make financial decisions, including loan applications andonline banking is an essential first step.
Sanjay Podder,MD, Accenture Labs India, located in Bengaluru describes part of the Tech4Goodinitiative: “There are broadly three challenges this project is addressing —increasing awareness of financial products among low-income women with highlevels of illiteracy; understand the behavioural traits of low-income women sothat the microfinance solution can address their needs while building theirtrust and engagement with front line microfinance officer; and increasingadoption of microfinance solutions among low-income groups in India.”
To meet thesechallenges Accenture Labs helped develop the Grameen Guru, a smart phone-based multilingual chat bot thatleverages augmented reality for clients who can’t read or understand writtenmaterials. Using the app, a user can hold their phone over a brochure thatdetails available financing options and the Guru virtual assistant prompts aconversation in the local language to explain the material.
Grameen’s FarmerLink is an agtech program designed to increaseresilience of farming households by improving their productivity, providingthem access to appropriate financial products and services, and linking themdirectly to markets. The foundation partnered with India’s Paytm Payments Bank“to bring uninterrupted banking and financial services access to the remotestvillages in our country. We will continue to focus our efforts towardssupporting and educating rural women and youth, helping them move towardsfinancial inclusion.”
A pilot effort in 2018 in the Nagpur district of Maharashtra provided financial education to local workers that has since expanded to all of India. Paytm provides 7 million people in 300,000 rural Indian villages safe, secure, cashless transactions. Accounts require no minimum balance, online charges are waived, and the bank pays a 4% interest on savings. Partnering with Tata Trust, Google’s Internet Saathi program for financial literacy has trained 1.35 million women in 140,000 villages in 13 states.
The concentrated efforts of banking, internet service providers and non-profits will transform the financial well-being of small holders and individual entrepreneurs.
Source: Kiva, Grameen Foundation, TEAvestment, Accenture Labs