WeGro: A better way to provide credit support to farmers

From Sarat Chandra Chattopadhyay's Gofur Miya (the destitute farmer in Sarat's short story titled Mahesh) to modern-day sharecroppers, farmers have always remained cash-strapped, and their subsequent overreliance on loan sharks has kept them perpetually oscillating around the poverty line.

WeGro, an Agri-Fintech startup, promises to address these issues by digitalising the finances and resource allocation dynamics in the agriculture industry. 

"We all say that farmers are our great heroes and they feed our nation. But our great heroes always suffer from the credit crunch and have to pay high-interest rates on the loans they take. We always wanted to pursue a venture that could have a massive impact. And there could be nothing more impactful than coming to the aid of our farmers," said Mahmudur Rahman, CEO of WeGro.

In short, WeGro provides credit support to farmers by taking funds from urban investors with idle money, purchasing high-quality agricultural inputs (livestock, seeds, calves etc.) with those funds, and loaning these inputs to the farmers (and sharing the profit between the farmer and investors). 

Co-founded by Md Mahmudur Rahman and Md Alvi Rahman, the company was formally incorporated in June 2021. Initially, they started with a pool of 35 lead farmers and currently are handling a market portfolio of around Tk40 crore. 

They also provide farmers with expert advice and feedback to ensure successful harvests. WeGro then repurchases the crops or the animals from the farmers and sells them to urban vendors. From the proceeds of the sales, they distribute the principal and the profit to the investors. 

In 2022, WeGro was selected as one of the top eight startups from the Springboard Programme in Bangladesh of Youth Co:Lab, an initiative co-led by UNDP and Citi Foundation, which incubates youth-led startups with mentorship, grants, and networking support.

The Business Standard sat down with the co-founders of WeGro, Mahmudur and Alvi, to discuss the mission, vision and business model of the startup and how they intend to serve the farmers of the country.

The origin story 

Both Mahmudur and Alvi come from a business background with years of experience in corporations like Robi, ACI and Reckitt-Benckiser, as well as, startups like Khaas Food. However, they always wanted to pursue something of their own. 

"First, I had attempted to launch a butchering business. I was inspired by the Indian unicorn company Licius to pursue an Omni-channel FMCG (Fast-moving consumer goods) venture, said Mahmud.

However, he could not focus on it entirely as he was still a full-time employee at a multinational corporation. So he decided to leave his job at Reckitt-Benckiser and joined Sindabad.com to understand how startups function. 

Eventually, Mahmud would leave Sindabad as well to focus solely on the butchering business. And he was receiving positive responses from customers. Unfortunately, the Covid-19 pandemic hit around the same time and Mahmud could not continue his business. Instead, he joined Khaas Food as a consultant and later their Head of Marketing. It was at Khaas Food, where Mahmud met his co-founder Alvi.

"During our time at Khaas Food, Alvi and I learnt how credit-stripped smallholder farmers were and how difficult it was for them to access loans and get the right price for their product. We also learnt in great detail about the agricultural value chain which helped us when we started WeGro," said Mahmud.

What does WeGro do?

Credit support, as well as, the supply of quality inputs (fertiliser, animal food, etc) has always been the bane of existence for Bangladeshi farmers. WeGro aims to address these issues with financial technology. 

WeGro provides farmers with expert advice and feedback to ensure successful harvests. It then repurchases the crops from the farmers and sells them to urban vendors. PHOTO: MUMIT M

As Mahmud said, "Most farmers in Bangladesh are sharecroppers and often do not have collaterals. Moreover, formal financial institutions also require a lot of paperwork which farmers cannot provide. Hence, formal financial institutions like banks and Nonbanking financial institutions (NBFIs) are often not interested in providing loans to smallholder farmers, let alone agricultural inputs and other resources."

"Farmers have to pay extremely high interest rates (up to 30-35%) to loan sharks and/or microfinance institutions. Given their deplorable condition, farmers are discouraging the next generation to become farmers and instead pursuing other professions. This is why there is a shortage of labour during every harvest season, pushing prices of agricultural products up," added Mahmud.

WeGro aims to bridge this gap by fostering a Digital Agricultural Financing Platform (where investors can keep track of their investments). However, instead of providing farmers with cash support, WeGro provides input support. 

"We don't provide farmers with cash. Instead, we would give them a calf or a few sacks of seeds. But we don't stop there. We also provide them with training as well as expert advice and feedback to ensure high-quality meat or a good harvest of crops," said Mahmud. 

"We also analyze the seasonality in the demand and supply of crops to provide better suggestions to the farmers, in terms of what kind of seeds and fertilisers they should use and when they should begin farming," he added. 

In the case where farmers have already produced during the harvesting season, they can store the crops with WeGro as a mortgage and take loans (seeds or fertiliser) for their next crops. WeGro then stores these crops and helps the farmers get better prices during the off-season when supply will be lower. 

Then WeGro also purchases the final product from the farmers and sells them on their own accord. From the proceeds of the sales, they forward the profits and principal to the original investors and keep a commission from the profit.

Moreover, WeGro aims to develop a Credit Scoring System for farmers. One reason why banks or non-bank financial institutions do not lend to farmers is the lack of information on their previous financial transactions and their ability to return the loan. WeGro is creating a database for farmers and their transactions and hopes to collaborate with financial institutions in the future to make finance more accessible to farmers.

How farmers are funded

WeGro ensures a Sharia-based investment scheme, that is, you only profit from your investment if the farmer makes a profit on the harvest or the animals being sold.

"There are lots of people in Dhaka with idle money who want to invest but they either do not want to involve themselves with interests or they are just risk averse. And even those who want to invest, are more comfortable with traditional channels like fixed deposits, national savings certificates, the stock markets etc. We wanted to integrate these urban people with the farmers through our platform," said Mahmud.

"The most difficult part was crowdsourcing funds. We had to hold Zoom meetings for hours with potential investors and answer every single one of their questions before they agreed to invest in WeGro," added Mahmud.

WeGro promises 18-22% returns on investment while guaranteeing principal protection. The minimum amount of investment is Tk20,000. Investors also have the option to insure their investment against any calamities (death of an animal or natural disaster). WeGro has also introduced Fintech products like, "grow now, pay later" schemes which allow much-needed breathing space for farmers.

"When we started, we did not think like startups in the sense that we would have to bring in this much seed funding from abroad. Rather, we envisioned ourselves as an investment bank or an asset management firm for farmers."

Mahmud hopes that one day, WeGro would be able to expand its operations beyond the borders of Bangladesh to other similar regions like South Asia and South-East Asia as well as Africa. 

Moreover, Mahmud believed that the role of mentorship was extremely important. As he said, "As a CEO or COO of a startup, we have to assume a role that often requires 20-30 years of experience to fully understand. However, you don't have that luxury at a startup."

"The Youth Co: Lab initiative helped us immensely during this mentorship phase. We could get in touch with industry experts and other executives. From them, we learnt what are the mistakes that we should avoid and what are the best practices to be followed," he added. 

WeGro wants to introduce more Fintech products that are compatible with the agricultural value chain. By 2023, they want to handle a market portfolio of Tk100 crores. In the next four years, WeGro wants to serve at least 1% of the entire market, which is around Tk1000 crore.