Hydroponic farms from The 2015 Martian movie starring Matt Damon do not need soil to grow crops. In the film, astronaut Mark Watney (played by Matt Damon) survives being stranded on Mars by growing potatoes—using his feces for fertilizer. What am I playing at? These farms are an imaginative take on what the future of agriculture could look like. They provide a glimpse into the possibilities that technology can offer us. However, We will not focus on the front-end physical Sciency part of agriculture; instead, we will concentrate on the future of the backend financial processes that ensure agricultural activities run smoothly and empower the farmer economically.
We will highlight how technology is finding its way into Agritech, revolutionizing payments, lending, and insurance in the agricultural sector. Before we get to that, we shall first explore the current financial drawbacks weighing in on the agricultural industry. That way, we can see how technology plays a solid part in thrusting the agricultural finance sector into the future.
The MVP topping the list of challenges is that farmers face limited access to financing and insurance. This makes it challenging for Agri-citizens to invest in their crops and mitigate losses in cases of crop failure. The disadvantage results from the fact that the agricultural industry is concentrated in the country’s remote areas, making it an uphill climb for banks to provide digital finance services to areas where farmers have nothing to show for toiling throughout the year. In these rural areas, farming is guesswork. Small-hold farmers don’t have the money to invest in inputs or labor. And they don’t have the money because, for the banks, a small-hold farmer doesn’t exist. This has been the trend so far.
From that, it is clear the implications banks and financial institutions consider before rendering their services to agriculturalists. Most farmers, unfortunately, thrive in the informal economy. That means a lender cannot access and review records such as collaterals, income, and overall performance from their farming. Hence this causes the industry to be unpredictable and too volatile for banks to engage with risk assessment and management.
Other challenges blockading Agri-citizens from utilizing the full power of digital financing include the myriad of capital the industry requires to keep rolling. This comes from how vulnerable crops are and the poor infrastructure surrounding the industry’s remote areas of operations. All these challenges could snag the floats of financial institutions, and they would go under. With these challenges, banks lay down digital services such as lending, insurance, and payment services, slamming a “Rude” ‘Rejected’ stamp on their ‘Cover the last mile’ agenda.
Now that we have had an overview of the drawbacks, this is where fintechs put on a cape and fly into the rescue. Agritech companies have an assortment of weaponry they use to engage the challenges mentioned above. These include Blockchain, big data analytics, and mobile money platforms.
One Agritech example is Farmworks. FarmWorks Agriculture’ business comprises two parts: self-owned farms and contract farming. Self-owned farms serve as “demo farms,” where training, research, technology verification, and demonstrations can be conducted. Approximately 1,000 acres of leased farmland are utilized by FarmWorks for this purpose.
Contract farming projects are more significant to the work of FarmWorks. Such projects enable the company to collaborate directly with local small-scale farmers, addressing fundamental areas such as crop selection, cultivation techniques, and market access. By providing the necessary resources and adopting the appropriate methods, FarmWorks can visually train farmers in optimized planting techniques, increasing their efficiency and yields.
Another example is M-Kulima. This is a system designed for all agricultural stakeholders. It enables easy communication and transaction between companies, the government, and farmers at anytime. M-kulima can record and process a farmer’s and farm’s profile information. It can also aggregate information about crop, location, and harvest data. Financial institutions can then use all these data to lower risk and cost when transacting with smallholder farmers.
i-Procure also leverages its network of retailers to reach customers in the most remote locations in Kenya. Their alternative technology-enabled supply chain allows one to monitor the prices at which your products are sold anywhere in the country. iProcure is the largest agricultural supply chain platform in rural Africa.
In addition, to complete procurement and last-mile distribution services, they provide business intelligence and data-driven stock management across the supply chains, which is of great value to manufacturers and consumers. I-procure also provides direct after-sales support and a loyalty program.
Integrating Blockchain into farming is another way fintechs are intertwining with Agritech. Blockchain ledgers can be used to track and record a crop’s journey from seed to sale. This intersection offers the proper management of crops, easing agricultural trading and reducing crop wastage. Financial companies can use the ledgers as leverage to provide their services to farmers even in the remotest parts of the country. A few examples worldwide include AgroChain: a blockchain-based platform that enables farmers to track the journey of their crops from planting to John Doe’s dining table. Ripe.Io is the second one: It improves supply chain efficiency, and GrainChain; helps farmers manage their grain harvest.
These are some of the examples of numerous fintechs that are snuggling their way into the Agritech sector. We have witnessed their impact on supporting financial inclusivity in the dim and distant lands where the agricultural industry primarily resides.
As Kenya’s Silicon Savannah expands and fintech converges with Agritech, the agricultural sector gains numerous financial opportunities that were impossible before the rise of financial technologies.