Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.
Source: The World Bank
Close to half of the world’s farmers remain unbanked and numerous agribusinesses are underserved by financial institutions due to the volatile nature of the agriculture sector. Being climate-sensitive, this sector’s outputs depend entirely on varying factors such as temperature and humidity, and also the arrival of monsoons at the right time. Climate change and the consequent weather extremities have severely impacted agricultural productivity over the last few decades, resulting in significantly low crop yields that are also poor in quality.
Lending institutions in many countries such as Jamaica and the United States have been cautious about funding agriculture, citing reasons that include the above-mentioned poor productivity, lack of collaterals from farmers, and, in some cases, political situations such as the ongoing US-China trade war. In addition, it is crucial for banks to conduct intensive risk assessments before granting financial aid, which, being labour- and time-intensive process, further discourages these lending institutions from extending their services to low-yield portfolios. In other words, what these institutions lack is farm-level intelligence that would enable smoother and efficient operations.
The recent advancements in technology offer a myriad of opportunities for better and efficient financial inclusivity in both developed and developing nations around the globe. Efforts by numerous entities, particularly by agripreneurs, have paved the way for innovative agribusiness software and solutions that help lending institution assess the creditworthiness of a farmer or an agribusiness and mitigate risks involved in the process.
Organisations such as CropIn Technology are propelling agri-tech innovations to drive digitisation in the agribusinesses the world over. CropIn leverage alternative agri-data, such as those derived from satellite monitoring, artificial intelligence and big data analytics, to make business operations easier for financial institutions. CropIn’s SmartRisk™ is a unique agri-AI/ML solution that combines multiple sources of data including the platform’s global agri-ground intelligence, weather and satellite imagery.
The platform establishes the performance of every pixel at regional level (farm/postcode/state/country) — both historical and present — to deliver regional and plot-level insights at a fraction of the traditional cost and effort. The platform allows users to identify crops, detect crop health, forecast yield and obtain farmer-level plot and crop performance reports, helping key stakeholders in the BFSI sector to hedge risks and take informed business decisions.
Lending institutions can thus assess the performance of a farm plot based on historical, current and predictive data with respect to the crops that were and are being cultivated, the health of the current crop and the yield forecast for that season. CropIn’s platform also allows the digitisation of ground-level intelligence by facilitating the registration of farm and farmer details, thereby reducing paperwork and hours of human labour. The digitised data, along with easy-to-integrate APIs, also ensures hassle-free analysis and reporting as and when required.
CropIn’s proprietary algorithms enable not only accurate crop detection but also crop growth and crop stage analysis, which aids financial institutions in identifying the time of harvest and thus enables timely recovery of the loan. Furthermore, financial institutions can leverage this intelligence to identify regions under cultivation to expand their agri-lending services to new regions.
Technology, with the above benefits, can ensure that more number of smallholder and marginalised farmers have access to financial aid, despite not being able to provide the institution with collaterals or other forms of assurance.
The service providers are also able to mitigate risks very early on, by analysing historical performance of the farm plot in the last three years and assessing the possibility of a good harvest at the end of the current season. The credit could also go a long way in improving the harvest for the farmer, by providing him with the resources to invest in better quality seeds or upgrade his farm machinery. This, in turn, brings home better returns for the farmer and ensures faster loan repayment. On the long term, this improves the farming community’s livelihood and, as an extension, the productivity of the agri-sector.