‘Financial Inclusion’ might be the most noble sector of financial technology, solving problems the traditional finance industry won’t — servicing underbanked demographics in areas with poor financial infrastructure.
Tackling these challenges, the EFSE Fund and the SANAD Fund for MSME, advised by Finance in Motion, have partnered with Village Capital and the LHoFT to develop the Fincluders Bootcamp 2017, unique investment readiness program designed for entrepreneurs offering inclusive financial products.
In the run up to the event, we caught up with the founders behind the startups. This time, we spoke to Mehmet Memecan, founder of Tarfin:
Mehmet Memecan, founder of Tarfin
“Financial inclusion to us is ensuring that our farmers have access to cheap, quick, convenient, and honest financial products, however remote they may be.“ — Mehmet Memecan
Could you introduce yourself?
Prior to founding Tarfin, I had been involved in farm inputs marketing for over 8 years. I used to work for the world’s largest trader of fertilisers. I marketed products in developed countries with very large scale farming all the way down countries with very small scale, subsistence farming. I had the chance to see first hand how farmers from different regions, different socioeconomic backgrounds used widely different methods to finance their farming operations.
What does ‘financial inclusion’ mean to you?
I want my customers to make more money. Cash-flow in agriculture is unique: farmers work and spend for their farms all throughout the year, yet get paid only once at harvest.
In farming, you achieve higher profitability by either planting more value added crops — also more capital intensive — or plant more acres of the same crop. Both of these options require additional to capital. If the farmer does not have the cash readily available or if the banking system fails to deliver competitive financing options to rural areas, it is almost impossible for the farmer plant and earn more. Financial inclusion to us is ensuring that our farmers have access to cheap, quick, convenient, and honest financial products, however remote they may be.
One of Tarfin’s customers
Could you describe the mission of Tarfin?
We want to make sure that our farmers have access to financing to grow their operations. Tarfin uses technology and its vast retailer network to deliver competitive financing options for farmers’ purchases of farm inputs. Using Tarfin’s point-of-sale lending platform, farmers can buy fertilisers, seeds and chemicals today, and only pay after harvest. We bridge the financing gap, and we do it at a cheaper rate than what’s otherwise available to the farmer. In 2017, on average a farmer that purchased his fertilisers with Tarfin saved around 120 USD. That’s real savings that our farmers use to improve their livelihoods.
POSRocket is the only POS platform that envisions financial inclusion as part of its mission — being an affordable POS provides all the needed financial tracking, reporting and analysis tools that can be utilized by home & micro businesses. Having validated sales data means that these companies are better qualified to microfinance. Financial inclusion wallets for the unbanked can be built right into POSRocket, allowing Cash in / Cash out transactions effectively turning the retailer into a bank teller. POSRocket is also closer to the consumer end of the food chain, allowing merchants to analyse customer trends and behaviours and makes them able to forecast demands. An offline mode makes POSRocket perfectly suitable for rural area operation and allows NGOs to monitor and control beneficiary purchasing habits.
What are the unique challenges and opportunities of your home market?
We unfortunately have very low financial literacy in Turkish agriculture. When lack of financial know-how is coupled with aggressive financiers, tractor sales people, smart phone resellers, you get lots of farmers with debt they cannot pay for products they do not need. Plenty of the financial products available in the market come with lots of gimmicks and hidden costs. That’s where we are different: we built our solution with our customers in mind. Tarfin’s financing service comes with absolutely no extra costs and is very simple to understand. For example, we do not use compound interest, we use a simple flat-rate interest. We do not penalize a farmer for early repayment, we actually provide the farmer with a discount.
The Tarfin team
What is your relationship like with the regulator there?
Turkey trails way behind most of the developed nations. Our financial regulator is extremely strict with regards to innovation in finance. Turkish regulations do not allow for crowdfunding for equity, we cannot peer-to-peer lend and we cannot form a truly digital bank. We are slow to adapt to global standards for new financial technologies, and I am certain that the real losers from this slow pace of change are the end-users of financial products.
How does the regulatory landscape differ in developing countries and developed countries? How can we address these differences with FinTech?
From what we see, we would like our regulators to adopt the regulatory sandbox approach. In our case, for example, we would have loved to explore the idea of peer-to-peer lending. I would bet that I would have been able to find tens of thousands of investors that would have wanted to invest in the Turkish farmer and earn an above-market return with the Tarfin platform. Had our regulators adopted the sandbox approach, we could have already piloted the p2p lending structure and proven its benefits to both the investor and the debtor.