Ag-Fintech: Financing made easy for agriculture

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  Quantumrun Foresight
• September 7, 2022

Insight summary

Small-scale farmers often struggle to access financial services, but Ag-Fintech (agricultural fintech) is changing that by offering tailored banking and credit tools designed for their unique needs. By leveraging data from agricultural technology and artificial intelligence (AI), Ag-Fintech platforms facilitate more informed risk analysis and credit provision, enhancing the efficiency of financial transactions in the agricultural sector. This technological shift also promises broader impacts like increased market competition, streamlined food supply chains, and the potential integration of cryptocurrencies and blockchain in agricultural transactions.

Ag-Fintech context

Access to financing tools and services in the agriculture industry has often been difficult for small-scale farmers. Large financial institutions have traditionally been hesitant to provide services to farming communities due to their remote locations and low population density. With Ag-FinTech, entrepreneurs are creating user-friendly banking, payments, and credit products for agriculturists.

Ag-FinTech comprises financial technologies for the agricultural sector, including farmers' access to funding and payment gateways. Ag-FinTech can assist in bridging the gap between farmers, merchants, and manufacturers by providing real-time data. The trillion-dollar global agricultural sector largely relies on spreadsheets and manual operations, despite real-time data playing an increasingly important role.

Ag-FinTech solutions use data from AgTech (agriculture technology) sensors and AI-enabled technology to measure farmers' costs, benefits, and risks based on their geography. Information gathered from Ag-FinTech can be used to create marketing campaigns and incentives for crop inputs. Meanwhile, the digital marketplace has revolutionized various business processes throughout almost every industry.

In fact, an action item outlined by the World Summit on Information Society (WSIS) is introducing a digital marketplace with FinTech capabilities which may help advance e-agriculture. A digital marketplace in agriculture is required to support market demand for high-quality agricultural products at a lower price from various regions. Incorporating FinTech into the digital market may help farmers overcome common money hardships and urge individuals and companies to support agriculture.

Disruptive impact

Ag-Fintech is revolutionizing access to agricultural capital in Brazil, making it easier and faster for producers to gain the capital needed to grow their businesses. For example, startup Traive connects investment funds, the input business, and resellers in Brazil. All analysis is done on the digital platform. It digitizes the risk analysis procedure, from data reception and processing through credit risk analysis.

Another startup, Terra Magna, uses production analysis, producers' sales flow, and financial health to grant commercial credit in a data-driven way. The platform uses satellite monitoring and other technologies to investigate the producer's history, manufacturing capacity, and additional data from planting to harvesting. Finally, Agrolend finances farms that earn an average of USD $100,000 to $1 million per year. The firm rapidly expanded and raised over USD $14 million in funding (2021) through a crediting application. The credit application can be easily and quickly completed on a mobile app.

Ag-Fintech is also scalable and accessible. Smartphones can process payments, display information, and facilitate business transactions from anywhere at any time. These platforms are anticipated to appeal to all participants in the agribusiness industry by allowing them to accomplish business transactions openly and conveniently using customized services. Agriculture-focused payment gateways offer essential services for investors to do business effectively. Investors may use their smartphones to invest in various agricultural goods through crowdfunding. Meanwhile, customers may compare different agribusinesses' offers and pay directly using these payment systems, leading to greater price competition among agricultural product suppliers and improved sustainability.

Wider implications of Ag-Fintech

Wider implications of Ag-Fintech may include: 

• Payment methods being streamlined, allowing farmers to buy equipment and materials quickly and create invoices for suppliers and customers.
• Easier loan application processes without the paperwork and complex requirements that often discourage farmers from availing themselves of the latest technologies.
• Application programming interfaces (APIs) creating payment gateways specifically for agriculture customers and the entire food production chain.
• Cryptocurrencies and blockchain being accepted as payments for agricultural products and services.
• Reduction in food waste as transactions for agricultural products can be streamlined and shipped to wholesale buyers (and even individual homes) faster.
• Increasing investments in Internet infrastructure like 5G and satellites to provide access to remote locations where agriculture businesses are concentrated.

Questions to consider

• How else can governments and financial institutions use Ag-Fintech to support small farms?
• What are the other potential challenges in implementing Ag-Fintech services on remote farms?