Blockchain and financial inclusion: digital lending reaches the company’s gate

Warehouse Receipt Financing was created to help farmers raise working capital against their inventory that is in warehouses, but has been plagued with fake receipts, multiple use of collateral, and fraud like the NSEL commodity swap scam from 5,600 crore to Rs. Over 90% of inventory revenue financing is cornered by merchants, and farmers have yet to be a part of it in a big way.

To restore trust and transparency to the warehouse receipt financing market and make it work for farmers, the Maharashtra government tested the use of blockchain technology. From February 21 to April 27 this year, the Maharashtra State Warehousing Corporation (MSWC) conducted a pilot project on the blockchain in 16 warehouses in five locations: Pune, Ahmednagar, Wai, Washim and Bashmathnagar. Enabling the MSWC in this was the fintech solution startup, Whrrl.

During the pilot run, 50 transactions were carried out and loans totaling Rs 87.31 lakh were distributed. Farmers accounted for 41 of these transactions and raised loans of Rs 68.27 lakh against warehouse receipts. The merchants raised Rs 19.04 lakh in nine transactions. During this period, 535 receipts were generated for 65.77 lakh kg of goods worth Rs 38.93 crore. Farmers accounted for 192 revenues, traders were 178, and government entities such as NAFED generated 165 revenues.

“We are making loans to farmers from banks at an interest rate of around 9%. Currently, the farmers loan process takes 7-15 days with a lot of documentation and verification. Whrrl allows the transfer of the loan amount to farmers in just five minutes in a secure and transparent way, ”says Ashish Anand, co-founder of Whrrl.

Whrrl is the first independent blockchain platform in the country to cross the $ 5 million transaction threshold within three months of launching its pilot project with MSWC. It has now incorporated the Maharashtra State Cooperative Bank as a lender on its platform, and the bank has pledged 2,000 crore of corpus for loans to farmers via Warehouse Receipt Finance.

Anand says Whrrl’s solution combines blockchain with IoT and Smart Contracts to make it easier for farmers to borrow against any merchandise that is in the warehouse without any guarantors. For banks, it becomes a risk-free lending process and brings transparency into the system. “Despite blocking restrictions during pilot execution, the number of loan transactions made by farmers using inventory receipts has been encouraging, while merchants and government entities have also actively engaged on the blockchain platform,” says Anand.

The platform aims to protect farmers from financial losses due to low market prices at harvest time and to increase their income by 30-40%. Whrrl’s blockchain network and mobile app connect banks, warehouses / collateral managers and borrowers on a single platform. Using the tokenization and immutability properties of the blockchain, the network reduces the risk of lending for banks and smart contracts help increase efficiency for other participants.

Founded by Ashish Anand, Falguni Pandit and Abhishek Bhattacharya, Whrrl has received grants from IIM-Ahmedabad, being part of its financial inclusion accelerator and another grant from the ICAR-NAARM laboratory. It is in the process of raising Rs 15 crore in funding and has received a term sheet of Rs 3 crore with a pledge of Rs 5.50 crore. Enthusiastic about agricultural reform bills and other initiatives to develop storage infrastructure closer to farms, Whrrl is also launching an e-trading platform. He has just received a pilot order in Telangana too.

There are 64,000 agricultural warehouses in the country with a capacity of 150 million metric tons. The inventory receipt financing market is estimated at Rupee 74,000 crore. Many of the players in the agricultural commodity supply chain have started adding fintech solutions to their portfolios. The much-neglected sector is finally receiving well-deserved attention and it is hoped that farmers would benefit from the infusion of technology, finance and reform.