While Thai farmers have more or less avoided the economic ravages of the pandemic -- people still need to eat through lockdowns and travel restrictions -- they are not shielded from crises this year.
Their problems are two-fold. Yearly droughts have led to lower crop yields and inconsistent planting schedules. The increased risks on the sector have made access to loans more difficult for farmers, a longstanding issue exacerbated by a recession.
Without access to reliable capital, planting through undesirable weather conditions has become an undue burden on farmers, especially rice farmers already suffering from low margins and commodity prices.
This is where Ricult comes in. The startup founded by MIT grads recently received US$2 million in a Series A round from the venture capital arms of Bangkok Bank and Bank of Ayudhya to expand into Thailand.
The company has created a free AI-powered platform for farmers that offers proprietary weather information and forecasting, and advice on growing schedules, where to buy seed and fertiliser and what mills offer the best prices for their crops.
About 200,000 farmers in Thailand use the app. An estimated 50% of Thai farmers own a smartphone.
Farmers input data on a number of variables, including soil quality and planting schedules among others, then Ricult sells this data to banks and other lenders so that they may better calculate risk to offer lower-interest loans to farmers -- usually between 50,000 and 100,000 baht -- available through a lending service on Ricult's platform.
"In Thailand, the richer you are the cheaper your capital costs will be, while the poorer you are then your capital costs will be extremely high," said Aukrit Unahalekhaka, Ricult's chief product operator. "We realised there's this information asymmetry where banks don't dare to give loans to farmers because they don't understand the risk, and once farmers do get money they often invest in fertiliser and seeds that are not the optimal choice, but whatever is available in the community where the prices are quite high."
A farmer using Ricult's mobile app.
CAMBRIDGE TO KANCHANABURI
Ricult started through an accelerator programme at MIT run by Usman Javaid, its chief executive, and Aukrit Unahalekhaka, its chief product operator.
In 2017, Mr Javaid began Ricult operations in Pakistan, while Mr Aukrit, a Thai national, returned to Thailand to begin operations out of Bangkok. Some 60% of Ricult's revenue comes from Thailand, earned by selling data to banks to offer loans and sugar mills that use the data to improve their supply chains.
Many farmers (who are estimated to make up over 40% of the Thai workforce) are denied financing from traditional banks, which say they are unable to calculate risk properly, and must go to loan sharks who charge high interest rates. This lack of financing makes it difficult for farmers to scale up operations or switch crops even as their main crop, usually rice, proves unprofitable year after year. The government routinely rolls out billion-baht loan programmes, but these have been unable to lift many farmers out of the downward spiral of debt and borrowing.
Ricult is part of the trend of environmental, social and governance (ESG) companies, for-profit firms aimed at alleviating societal problems with a business model that doesn't rely on donations like many non-governmental organisations. ESG stocks have become a hot ticket for investors wishing to assuage guilt in participating in global markets inherently dependent on exploitation and environmental degradation.
"There are a lot of issues that can be solved through digital platforms in terms of providing information and giving recommendations through data," Mr Aukrit said. "The farming sector in Thailand is super fragmented, with farmers growing crops seemingly randomly at low yield, high cost and slim profit margins."
Mr Aukrit says the farming sector in Thailand is 'super fragmented', with farmers growing crops seemingly at random with low yields.
NEW BUSINESS MODEL
One of Ricult's subgoals is to move Thai farmers away from rice and towards higher-value crops like durian and pineapple, or at least more niche rice varieties sold by upmarket grocers. While high in value and demand, durian trees take five years to begin bearing fruit, so they require large upfront costs that make financing inaccessible to many farmers.
Mr Aukrit says demand for organic produce is slowly growing in Thailand, despite making up only about 1% of the domestic market, as consumers become more conscious of their health and the environment.
"With climate change the weather is very random these days," he said. "If farmers make the wrong choice of when to plant, their productivity can swing by 20-30% because there is no rain."
This year's drought, for instance, caused sugar production in Thailand to drop to 8.27 million tonnes of sugar for the 2019-20 crop year from 14.5 million tonnes in the 2018-19 year.
With the new influx of capital, Ricult plans to expand its financial and tech services to farmers to expand its platform and in turn grow its revenue potential selling data upstream.
Mr Aukrit says the company plans to add insurance products, labour hiring and tractor listings to make it a more complete all-in-one platform for farmers. The company is also eyeing Cambodia and Vietnam as potential expansion markets.
"Our mission is to help poor farmers, not to make money off them," he said. "Even though we make money from larger guys like banks, our investors know they cannot push us on profits until we are showing social benefits for farmers."