Tea retailers with expansion plans and tea growers trying to finance new processing equipment, quickly discover that bankers prefer big profits over big ideas.
Venture capitalists consider these opportunities as “unbankable” and angels are elusive, which is why entrepreneurs in both the tea lands and consuming countries turn to crowdsourcing; foundations offering specialized “social” and “green” funds, and commercial microfinancing.
In many instances the challenge is not credit worthiness. Kiva CEO Neville Crawley explains, “You have rich financial lives way down in the economic pyramid. It’s just not being recorded anywhere.”
Neville is pursuing a cell-phone accessible financial database for the millions worldwide who lack an online identity and credit history. “What we need to focus on is a very low-cost form of digital identity, and a way for all of the credit, from the quite informal to the very formal, to be written in the same way,” he said.
The Kiva Protocol is a digital identity system designed to be inclusive, he said.
“We’re not looking at alternative credit scoring, but actual credit scoring. Even someone living on $2 a day, they have a couple hundred-dollar balance sheet. People are living exemplary financial lives. We’re not trying to make an alternative system, we’re trying to improve The System,” he told Impact Alpha.
Putting Money to Work
On returning from a visit to India, where she met women entrepreneurs who were recipients of Grameen Foundation micro loans, Tasha French Lemley decided to establish a permanent Chai Wallah tea cart location in Nashville, Tenn. “Face-to-face interaction between people on different sides of a divide is where dramatic change happens,” said Lemley who founded The Contributor. “My dream is to increase this interaction over great cups of tea, while providing self-sufficiency for some amazing women,” she said. The cart is operated by disadvantaged and homeless “and has been embraced by the Indian community in Nashville—it reminds them of home and family,” explained Lemley.
She successfully turned to Kiva’s broad base of small investors and investor groups for $7,000 and promptly repaid their generosity.
Crystal Stokes, a mental health professional, operates Frank Community Farm in Henrico, Va. on Chesapeake Bay. “My team and I decided to provide a space for adults with autism and other neurological disorders to come and learn job skills in an agricultural setting. We chose an agricultural setting because it encompasses so many job skills: planting, weeding, harvesting, packaging, shipping, deliveries, customer service, event planning, public speaking… the list goes on.”
“Our local community is saturated with urban farmers 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 the community is enjoying native local tea.” She markets the tea through a small CSA (Community Supported Agriculture Program).
Her proposal for a $6,000 loan that returns no interest is currently 98% financed by 158 lenders with four days to go.
Financial Assist for Small Tea Growers
Financial technology (fintech) increasingly takes into consideration weather and other variables that have a direct impact on the financial viability of agricultural ventures, including tea.
In July Lauren Fulton attended the annual meeting of the U.S. League of Tea Growers. She introduced TEAvestment, a new venture to promote investment in the tea industry and help tea businesses better understand their financial 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 upfront investment, establish a timeline for your tea business to ‘break even’ and repay 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. Empowering low-income women to make financial decisions, including loan applications and online banking is an essential first step.
Sanjay Podder, MD, Accenture Labs India, located in Bengaluru describes part of the Tech4Good initiative: “There are broadly three challenges this project is addressing — increasing awareness of financial products among low-income women with high levels of illiteracy; understand the behavioural traits of low-income women so that the microfinance solution can address their needs while building their trust and engagement with front line microfinance officer; and increasing adoption of microfinance solutions among low-income groups in India.”
To meet these challenges Accenture Labs helped develop the Grameen Guru, a smart phone-based multilingual chat bot that leverages augmented reality for clients who can’t read or understand written materials. Using the app, a user can hold their phone over a brochure that details available financing options and the Guru virtual assistant prompts a conversation in the local language to explain the material.
Grameen’s FarmerLink is an agtech program designed to increase resilience of farming households by improving their productivity, providing them access to appropriate financial products and services, and linking them directly to markets. The foundation partnered with India’s Paytm Payments Bank “to bring uninterrupted banking and financial services access to the remotest villages in our country. We will continue to focus our efforts towards supporting and educating rural women and youth, helping them move towards financial 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.