Digitalisation has proven to be a significant stepping stone to success in countless sectors and the past two years have only strengthened the digital outlay of India. Digital assets across the Indian economy have doubled over the past 15 years, as firms diverted from not only investing in IT but also digitising their physical assets, making it easier to exchange them in real time. Dairy amongst all sectors plays an integral part of the single largest agricultural sector in India, accounting for 5 per cent of the national GDP.

Being the largest and fastest-growing markets in the world, India’s per capita milk consumption at 427 grams/day already exceeds the world average of 305 grams/day. In addition, the National Action Plan for Dairy Development aims to increase organised milk production from the current 20-21 per cent to 50 per cent by 2024 and milk production by cooperatives is being targeted to increase from 10 per cent to 20 per cent and the private sector from 10 per cent to 30 per cent. While 80 million smallholder farmers with herds of fewer than ten animals produce 70 per cent of milk, financing the sector has been a daunting concern to unlock the potential of small and medium-sized enterprises.

Financial solutions

As a tradition of the past in most sectors, when it comes to monetary requirements, farmers would make use of traditional financial entities like cooperative societies, banks and money lenders. Digital transactions were a far-fledged thought to weave farmers in, hence resorting to the traditional methods of financing. The standard financial framework in the rural regions was tangled, time consuming and heavily dependent on documentation. This led to perplexity and hesitancy amongst farmers, giving rise to more modern and feasible financial solutions.

Taking one step at a time, with the onset of digitisation and the unprecedented pandemic, dairy farmers’ cooperatives and organised labour have also begun to concentrate on integrating online payments for farmers instead of cash payments. Given that smaller milk producers control a large portion of the market in India, the introduction of digital payments presents its own set of challenges, not having a bank account being a notable one. In recent times with the Digital ID – Aadhaar, India becoming the fastest-adopting economy with real-time digital payments, and the availability of digital footprints of farmers is allowing for a new financial revolution to take place and agri fintech start-ups that are focused on BFSI interventions in the dairy sector have become the necessity of the hour.

Choosing different path

It is not only technology but the ability to understand the unique needs of the target segment and translate it back with banking partners in terms of customised digital financial products and the creation of simplified processes are the key to customer adoption. Some fintech companies have chosen a different path for the 80 million dairy farmers and dairy microenterprises to access BFSI and their day-to-day needs.

With an increasing number of businesses utilising technology and ensuring that farmers gain access to services like credit and insurance, to deliver assured quality across the dairy supply chain financing in the years to come, the country is predicted to witness a surge in businesses attaining digital competence. Dairy micro enterprises are expected to advance in areas such as digital banking, digital payments and fintech that will result in farmers and customers connecting for seamless and smooth transactions. In India, it is predicted that the size of the dairy industry is expected to rise from ₹14,899.8 billion to ₹31,185.7 billion by 2028 boosting the growth rate of the economy to 13.02 per cent by 2023-2028.

The author is founder, MD & CEO, Digivriddhi Technologies Private Limited

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