Financing Smallholder Farmers with Salesforce
By: Brent Chism, CEO, TaroWorks
Sistema.bio manufactures, sells, installs and services a biodigester that transforms animal manure into biogas for clean cooking and organic fertilizer. Yet the roughly $800 it costs each farmer in Mexico, Nicaragua and Kenya to purchase the product is often more than a smallholder can afford to pay upfront.
To address that challenge and drive product purchases, Sistema.bio looked to partner with a traditional Microfinance Institution (MFI) to provide asset-based microloans but interest rates as high as 120% and long loan turnaround times in Mexico, where Sistema.bio started, made that impossible. That’s when Sistema.bio’s CEO Alexander Eaton decided instead to build an in-house loan underwriting and repayment program that offered no-interest loans, with help from Kiva, which were more in keeping with its social mission. Finance Director Esther Altorfer said it’s a decision nobody regrets.
“We’ve managed to increase sales (and) we see it even now, as we are expanding, to be a key competitive advantage (compared) to other biogas companies,” said Altorfer. “Through the whole loan appraisal process we (also) get to know our customers much better.”
Cloud and Mobile Technology Can Support Lending
As more organizations selling products to base of pyramid consumers offer asset-based financing, these first-time lenders are getting a crash course in loan-making and collections. They are finding that technology – cloud computing, mobile apps and SMS messaging – can help turn consumer financing programs into a core competence.
Sistema.bio was already using the Salesforce Nonprofit Success Pack and Salesforce App TaroWorks (AppExchange) – a mobile, field services tool which functions both online and offline – to improve biodigester sales, installation and maintenance. Yet as the loan program – begun in 2012 – grew, Sistema.bio needed solid methodology to assess creditworthiness and data visualization capabilities to display those results so loan decisions could be made in real time without slowing product sales momentum. It also wanted a way to monitor loan portfolio health to identify potentially delinquent borrowers. Salesforce and TaroWorks were harnessed to:
Build Credit Scoring System: The methodology is based on 20 factors as data points collected using TaroWorks mobile forms by field staff who already interact with potential customers to determine their biodigester needs. Scoring factors include quantitative metrics like sources and cycles of revenue and expenses as well as qualitative measures including the health of the farmer’s animals and cleanliness of the farm.
Develop Loan Data Dashboards: Field data collected offline using TaroWorks is synced directly to the Salesforce database, run as reports created by Sistema.bio and displayed in dashboards, which gauge overall loan portfolio health – like total principal outstanding and delinquency rates. The two-way data flow between TaroWorks and Salesforce gives Sistema.bio field technicians access to current loan status information on their devices to remind the farmer when the next payment is due.
Deploy Performance Management Tools: Sistema.bio’s credit coordinator can simultaneously send personalized SMS payment reminders to multiple customers with the same payment due dates. With TaroWorks’ field staff management functionality, Sistema.bio can also set sales team performance goals and show progress against those goals to both the sellers and their managers.
“Salesforce has been instrumental in this piece,” said Altorfer, by providing “… automatic alerts every time a loan appraisal has happened, the opportunity to communicate with a distributed team through online joint credit committee meetings and the live dashboards that tell us how the overall loan portfolio is doing as well as the progress of individual clients.”
Sistema.bio has made significant progress from a time when it had no formal process for loan screening and origination. As a result, the percent of its loan portfolio that is on time increased from 64% to 73% within five weeks of several major process changes. Delinquency rates on new loans have dropped from at least 30% by the end of 2015 to zero as of Q4 2017.
Digitizing asset-based financing: Lessons learned
Sistema.bio has learned lessons that will help the company as it expands its asset-based financing program:
Understand Sellers’ Methods: Before developing an asset-based financing process, spend time with field sales staff to understand how they already assess creditworthiness of potential customers. Sistema.bio realized their agents had an internal checklist to screen for risk. The next step was to turn that thinking into words, criteria, data collection forms, database fields and eventually credit scores.
Don’t Scrimp on Training: If Altorfer could do things over again, she would have spent more time training people on the technology, as some adopted fast while others struggled, resulting in incomplete data collection that initially hampered credit scoring.
Sweat the Legalese: Altorfer advises making sure your original customer contracts and other related legal documentation accurately reflect the new asset-based financing program and that loan terms and policies be easily accessible to team members and customers.
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