Tarfin, the Turkish digital platform that enables farmers to access agriculture inputs through instant financing solutions, recently completed a $1.3 million seed round.
Collective Spark Fund, a venture capital fund focusing on early-stage technology startups in fintech, consumer tech, and SaaS, led the round with a co-investment from Wamda Capital, a multistage VC focused on digital disruption.
Through a point-of-sale technology and backend credit scoring algorithms, retailers of fertilizer, seed, and pesticides can give farmers products on credit at lower rates than they typically do (29% vs. 45% annually) on the spot.
“Over 60% of farmers in Turkey are underbanked and face difficulties paying for farm supplies needed at the beginning of the farming season,” said Tarfin’s founder, Mehmet Memecan, whose business is based on the premise that technology and big-data analytics can give farmers access to inputs with wide-reaching and affordable financing, helping them to improve yields and reduce costs.
There are 2.4 million farms in Turkey, contributing more than $50 billion to the country’s gross domestic product, making Turkey Europe’s largest agri-economy. Tarfin’s approach to this market is to adopt a ‘very straightforward value proposition that gets even the slowest-to-change farmers moving.’
“We offer the same brand name inputs, but with a 10-20% lower price tag,” said Memecan. “It’s a strong driver in changing old and costly habits.
“When we develop new services within our platform, no matter how complicated the back-end, we strive to keep the customer-facing experience on a business-as-usual basis for farmers. We also rely on our retail partners to gain farmers’ trust in the platform and to assist with input procurement.”
Now, in addition to building its home customer base from 1,250 farmers to over 7,000 by the end of 2019, the company is also planning to expand into Romania, Poland, and the Balkan countries, potentially assisted by a Series A funding round next summer.
The company, which was launched in February 2017, as previously reported by AgFunderNews, sees data as the core reason for its strong growth to date.
“We go beyond traditional credit bureau data in assessing risk,” said Memecan. “When evaluating a farmer, our algorithms take transactional as well as farm level data into account, which helps us convert more leads into sales.”
He also said that statistical learning risk models provide financial institutions and other investors with a direct, reliable and impactful way to finance agriculture.
Going forward, Tarfin’s focus is on growing its number of retail partner locations as well as increasing the volume of transactions through each retail location.
“We currently serve 1,250 farmers through 67 retail locations,” said Memecan. “By the end of 2019, we plan to have reached over 7,000 farmers through 90 locations. That equates to over 20 mil USD of inputs sold and financed and about 58,000 hectares served by the end of 2019.
“In addition, while continuing to grow our market share in Turkey, we also plan to expand into nearby markets, mainly Romania, Poland, and the Balkan countries. Starting as early as 2019, our first target will be Romania, a country with a similar crop make-up, working capital financing need for farm inputs and availability of financial and farm-level data as our home market. We anticipate raising a Series-A round in summer 2019 to expand our business in Romania.”
Gorkem Oktay, partner at Collective Spark Fund and board member at Tarfin, commented: “We share Tarfin’s mission to create more sustainable agri-economies.”
Khaled Talhouni, partner at Wamda Capital, said similarly: “Tarfin is a great example of a value-added tech company with a model that effectively empowers farmers, allowing them to grow their businesses while reducing the risk for wholesalers. We are excited to be part of driving impact in the agricultural sector.”
Tarfin also provides institutional investors with an opportunity to invest in Turkey’s agriculture sector by packaging the loans – or receivables – into portfolios for them to invest in, essentially passing the credit risk onto institutions looking for higher investment returns.
“The agri-receivable backed security provides investors with a high-yielding investment structure backed by a diversified portfolio of farmer debt. As borrowing rates continue to increase, we are happy to have created an asset class that provides farmers with a cheap financing solution and investors with a high-yielding security,” said Murat Gülkan from ÜNLÜ & Co, the first investor in a pool of receivables arranged by Tarfin back in July.