Ag fintech has been catching more attention lately, as startups see an opportunity to modernize some of the more antiquated ways in which farmers take care of financial matters.
Brazil’s Agrolend is one of those startups, and it just raised $1.6 million in a seed round involving 30 investors. SP Ventures, one of Brazil’s most active VCs, participated in the round along with fellow Brazilian fund Barn Invest, local family office Provence Capital, and US agribusiness giant Continental Grain Company.
Co-founder Andre Glezer told AFN the startup initially considered keeping investors to friends and family, but found that VCs had a strong interest in what it had to offer.
Founded in December 2020, Agrolend’s goal is to help small and medium-scale farmers access loans more easily. It’s working with traditional ag inputs players to partner on the loan origination process.
Using what it describes as “advanced technology and innovative credit analysis,” Agrolend offers loans without the need for physical collateral. Its hope is to bypass the inaccessibility problems of the incumbent banking system by offering a digital solution.
Conventional banks typically lack an understanding of agriculture’s unique challenges, such as inclement weather, market volatility, and the seasonal nature of production – which, along with small-size loan requests, has made it particularly difficult for growers to secure financing from them.
Agrolend is trying to fill this gap in the market which until now has been filled by agribusiness multinationals. Originating loans for farmers requires connections throughout supply chains and only players like Syngenta, BASF, and their distributors have been able to do that until now, Glezer says – and that’s why the startup is partnering with them.
“Basically, Syngenta and other companies are extending loans here in Brazil in a way that is not done in other parts of the world. The problem here is that currency depreciated a lot over the last years and there has been increasing pressure because most of the agri-inputs are priced in [US] dollars. As things depreciate, there is a greater need for credit in local currency terms.”
The São Paulo-based startup’s loans range from 50,000 Brazilian reals ($9,050) to 300,000 reals ($54,300), covering a wide variety of crops. The loans last for up to one year and the farmer pays Agrolend after harvest. The entire process happens online – from requesting the loan, to making the final payment.
Depending on a farmer’s creditworthiness profile, the loan is sometimes made as soon as 24 hours after the request. The startup claims to offer lower interest rates than traditional banks with “no hidden fees.”
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Agrolend will use about a third of the seed funding to initiate loans, while the rest will be used to build out its team. There are also some licensing requirements it needs to complete that require it to have a minimum level of capital.
Even with a crowded seed round under its belt, the startup already has its eye on future fundraising.
“The key challenge for us will be to raise much more money for loans,” Glezer says.
“We are structuring a fund in Brazil that will receive all [our] loans. Then Agrolend will sell the loans to our debt investment vehicle, which requires us to raise a lot of money to fund the loans.”