Cultivating Prosperity: Verqor Aims to Revolutionize Agricultural Finance in Mexico

Speaker A: Foreign. Hello and welcome to the fourth episode of FinTech for the People. I'm Ami Parbu, your host and managing partner of Accion Ventures. At, uh, Axion Ventures, we believe in the power of fintech to reach those who've been left behind. As an early stage investor in fintech startups, we've invested in more than 70 companies across Africa, Latin America, Asia and the United States. In this season we're talking to founders working in embedded finance, specifically bringing software and financial services to small businesses in what we think of as traditionally overlooked and non digital industries such as construction, agriculture, logistics and manufacturing. They're less digital and they employ many, many small businesses. We're really excited to hear from founders who are working in these sectors. This week we're welcoming Valenty Rogacheva, co founder and COO of vercor. Vericor is a Mexican agri fintech platform that connects small and mid sized farmers with suppliers and buyers. And it embeds cashless credit directly into that value chain so farmers can purchase seed, fertilizer and technology when they need it most. Thank you Valentyna so much for being here today.

Speaker B: Thanks Amy. Ah, I'm glad to share a bit about Vercor and how we've been building our product.

Speaker A: Well, maybe just to get us started, tell us a bit about yourself and a bit about the journey of starting Vercor and getting to what you do today.

Speaker B: My first job experience was in a consultancy firm where I was responsible for leading different projects with social impact. They were different industries and they were implemented in different companies. But usually as we know like services consultancy companies are used by big corporates. So I was feeling like I was missing out on um, seeing like real impact after the implementation of certain project because I mean it takes time or the question of reporting also affects. So I was thinking how could I use my knowledge and experience and my drive to make an impact. And I think that entrepreneurship and own business is the way where you can see the impact in the best way. So with my co founder we started vercor. It was an idea of creating a financial model that can give opportunities to vulnerable sectors to prosper, to reach this economic mobility. And initially the model was not focused in agro sector, we focused it on um, real estate sector and we wanted people to get access to affordable credits and buy low cost houses. When we saw what was the drive of these people, like why would they need a house in the urban area? We saw that they mainly were leaving the rural areas and they were not able to afford Cost of housing in urban areas. That's why they were like wanting accessible credits and low cost uh, housing. But then we said okay, so if they are living from rural area, like there's something that happens there that people of course don't want to stay and they don't see it attractive anymore. So we started speaking to them and we saw that very few companies actually focus on working with them and offering any type of financial product that tailors for their needs. In Mexican rural areas, the main activity like of people is agriculture. Mexican agro sector is really big. It makes up almost 3% of GDP and there are uh, more than 300 different crops that grow here. And it employs more than 5 million agro units. So we're not speaking about 5 million people, but families. And that makes it even more amount of people that are employed there. But what happens to them um, is that in rural areas there are very small towns where they can't even reach a bank. It's very complex. So usually there is a little town of 5,000 people with one atmosphere and that's it. So for reaching a closed band, they need to drive minimum one hour or more as well. This added to the certain specifications of financial system in Mexico in general. It's not efficient, it's inefficient. So many procedures have to be done in person in a bank because of different things that they put like for protecting like security of accounts and all these like based on economic situation the country. For these people like to go and digibank and lose so much time of the day, it's very complicated. So they just opt for some informal options they have in their communities and like this circle goals like they do not apply or they are not eligible for formal financial products. They choose informal ones so they stay excluded from the financial system. They don't create credit history and the flows of mind that they have there. And um, it's very complicated to track them because the operations are very informal. So we saw that there is actually no financial institution focusing only on agri sector. So we can speak about some banks that offer products for agro. We can speak about some non banking financial institutions and a very big government structure that exists in Mexico. But exploring like deeply the products they offer, we realize that they do not satisfy the needs of the sector. So that's how we saw a big opportunity in that market.

Speaker A: Such a great overview of the challenges in Mexico in agriculture, the gaps that we're seeing. So maybe tell us about where Vercor does come in. What does Vercor do. And what's the core problem that you're trying to solve for farmers in Mexico?

Speaker B: In Vercor we decided to adjust our M model completely to agro sector. And what we did our products we operate nowadays. It's a digital credit. It's cashless and is designed specifically for the needs of farmers. The credit can only be used for purchasing other supplies. And we developed alternative credit score that allows us to evaluate not only financial part, not only financial potential of the farmer, but also his productive potential and commercial potential. And model also guarantee default which we've been having of less than 2%. So we mitigate risks of lending in agro and we make the process so efficient that a client can access a Credit Just in 72 hours after completing the application.

Speaker A: What would it take for them at a financial institution versus 72 hours?

Speaker B: Yeah, in a bank it could take four or five months to receive an answer which in majority of cases is no. And in non banking institutions can take up to like three months, two, three months. So we significantly reduce this time. But we also have an inclusive product. We do not ask collateral from farmer traditional collateral. We do not ask credit history. And farmers have this accessible financing that allows them to invest in better quality inputs like fertilizers, organic products, irrigation systems, greenhouses, everything they need in the fields. This way, year after year they increase their margins and they reach higher productivity. They can sell their crops at a metric price. They also have incentive to implement more sustainable practices in their fields. This way preserving the fertility of the soil that they used. So they get liquidity in time which is in agro sector is very important. So if they need to plant in certain week. We are not even speaking about months, we're speaking week or days depending on the rain, depending on the weather conditions. They have everything ready for that day, they can start their production cycle. They get inputs that only pass certain filters like of where core. So they only get verified into state, comply with all the regulation of the country. And the credit also invests an insurance, uh, a climate insurance against climate risks. So we also reach climate resilience for the families and we protect any possible loss that they can have in the fields.

Speaker A: And I think part of the challenge financial institutions have traditionally faced in agriculture is the risk of default either because of something that might happen, weather related, pest related, but in general just not feeling confident in the risks that come with agriculture. How do you manage that and maintain the low defaults that Faircord has?

Speaker B: I think we mitigate these risks. The risk mitigation is like inbed in the business model. So from the way we arrive to the farmer, we do it through a V2B 2C model. So we partner with the industry players such as crop buyers and agro inputs retailers. And this way we first obtain data that it's not available, that it's not digitized, that it's not traceable. So we obtain data about the farmer, like how he's been delivering his produce, how long has been the relation between the farmer and his commercial partners. Ah, so obtaining this data nurtures our algorithm and our score for improving the credit. Also what we do in the end of the cycle, we guarantee the payment from the buyer of the farmer. So we don't go to charge directly to the farmer, but the credit is paid at the moment that the farmer delivers the produce. The crop buyer first pays the amount to worker and then the rest of the farmer. The client acquisition starts from prospecting first B2B partners. So we have these alliances in the industry that allow us to approach farmers and also to minimize default rate when the credit ends.

Speaker A: Part of what we want to talk about in this season is why industry specific financial services embedded finance is so important. Why is it that Vericor can do what you do versus just a broader financial institution that may focus on agriculture, but may focus on small businesses in other sectors?

Speaker B: First it goes from the creation of how it was the model was created like we tried and changed financial product we had. So first it was just a credit so that farmer would decide how he could use it. Then it was credit that the farmer would send us like invoices of what he chose and we would adjust the credit to that amount. But then we realized that we have to control the use of the credit so that we ensure that the farmer can pay back in the end of the cycle. So delivering inputs instead of giving cash to the farmer, we make sure that farmer actually improves during each cycle. So that we educate our clients about the importance of use of high quality inputs. They see it in their margins, they realize the benefits of the credit pays itself at the end of the cycle. So in during this productive use of the credit is very important when we're speaking about giving financing to vulnerable population because we have to make sure that the money is used correctly and wisely. The metric here is not like how many credits we gave, but how we actually impacted after giving the credit. How we impacted the life of the farmer and his family, right? How farmer increased his incomes, how it helped him to preserve the soil, how he grew a multiple stars of production each cycle.

Speaker A: Because your guarantee for repayment is very much tied to uh, the yield and income generation for the farmer. Ensuring that that comes to fruition is critical for repayment.

Speaker B: The model helps to close the B2B relations that we have this B2B alliances because for supply chains we offer this value of traceability. So we say okay, if we offer financing to our farmers, you will know what is actually used in the fields like to produce strawberries or tomatoes or whatever like grain or whatever refinance so that when a uh, produce buyer receives the harvest they know which quality to expect. We can even adjust credit to only certain inputs that certain supply chain allows. So this part of traceability has been also very important like in the alliances that we create. So I think that's a future of eventually what we want to reach is that when any consumer goes to supermarket he can understand that actually how a uh, certain product was produced or done in the fields.

Speaker A: Part of what you've also described and we see in many of these industry specific financial services is the value created for not just the small business or the farmer in this case, but for other players in the supply chain in your case, for the buyers. As you think about Vericor in a few years, are you envisioning additional services solutions either for the farmers or for other players in the supply chain?

Speaker B: We envision Merkel as the biggest agrobank in Mexico in a few years and we want to be like the number one choice actually for the farmers when they think about uh, financial product they would hire. And we also expect to extend the offer of services for farmers but also for industry players like agro retailers. So that's in our plans for farmers in this case we are looking forward to offer them saving accounts like bank accounts. So that also could be like an additional source like of capital for record and for agri retailers since we are working so tight with them, we also know understand their needs and we've been identifying certain needs that they have for the financial product that will allow us in the moment that we can that tailor the product for them and offer them also like something very attractive that can help them. The also day to day liquidity and

Speaker A: it's so many pain points and cash flow challenges across the agricultural supply chain to solve. For one thing, every startup hits roadblocks at some point particularly in challenging industries like in agriculture. Could you share what some of the most challenging parts of building Vericore so far have been and how you're working through those today?

Speaker B: I think that the challenge that we face is first introducing completely digital products for a sector that it sometimes has, uh, struggles with using technology. But sometimes the obstacles, they only exist in our heads. We're thinking like, what if they will not use it? What if they don't have Internet? But then looking into, at least in the Mexican market, like people have smartphones, people have Internet, like access to Internet in rural areas. So it's something very accessible for them to use. We just need to find the right tools how to help them through using the platform. That's one of the challenges, like going completely digital, but not losing this human touch with the client. So eventually we now migrated to a digital strategy. We organize what we call worker tour. So we go to visit our clients in the strategic regions and towns. So we have this contact with them as well. And the other challenge is exactly like, how do we arrive to the client in a scalable way, maintaining quite small teams still, we're still 30 people. And that also was really helpful through this B2B 2C model, so that with these alliances we create, we can have access to big groups of farmers that allow us really maintain our, uh, cost of acquisition flow. I think that was like two main things that we've been adjusting for the last couple years to understand what's exactly the model like now to scale a

Speaker A: solution makes sense given the nature of how you reach your customers and build these financial products. Last question for you, Valentina, is one thing we always talk about is how team culture drives execution. You all have built, uh, a really strong, tight knit team. How have you built and motivated a team that understands both agriculture and fintech? As you just said, agriculture, people who come deep from agriculture. It isn't the most digital of industries. And yet you're trying to build tech solutions here. How have you balanced that and built a team that's excited about both?

Speaker B: We actually tried to bring talent with agricultural background, but also with financial backgrounds. And we saw that the people themselves sometimes come biased. They work in the industry. If they know the industry firms, they come already wired about the things that, no, we can't launch a completely digital product, they won't be open to it. So we focus on bringing people from fintechs or neo banks and helping them to learn about the sector. And how can we adjust exactly fintech products that exist, fintech approach that fintech companies use, but to the sector and I think the tight contact with the clients, the visits we do to the field, they actually help our team to see like the real impact they're doing. And that motivates them. But obviously in daily operations we really focus a lot in all time capacitations for our teams on um, evaluating results on data approach. So we try to be very data focused but also not to lose a sense of the not only financial results we're creating but also impact we're creating. And we're always maintain this open communication with our team about it's regular like on a monthly basis we highlight the results we get. We organize also events with our partners and I think that helps them not only to learn about industry but also to feel satisfied with the work they're doing.

Speaker A: Thank you so much Valentina for the time and for sharing more about record storing in the agricultural sector. Really appreciate it.

Speaker B: Thank you Emily and it was nice to be here and speak to you.

Speaker A: We'll see you next week as we shift gears to logistics. And welcome Sheryar Bhawani, co founder and CEO of Trucker. We'll explore how embedded financing is keeping Pakistan's trucking industry on the move.