Addressing the lack of capital means that all other value-added solutions will have an even greater impact in propelling farmers into better lives that they all deserve.
While the advent of agri-tech in Southeast Asia is to be praised – as farmers are one of the most ignored segments in society – the field often tends to be hyper-focused on only one part of the problem.
The vast majority of solutions help farmers improve their yields. The working thesis here is that if they are not earning enough income from their current crops, improving their harvest will, in turn, improve their wealth.
So we see some startups that provide in-person or digital education to farmers, teaching them the best practices of modern agriculture. Others provide these farmers with more accurate or comprehensive real-time data or analytics so that they can make more informed decisions about how to tend to their farm. Still, others give farmers tools that directly contribute to increasing the yield of their farms.
Don’t get me wrong. All of these approaches address crucial needs in Southeast Asia’s agriculture and should be applauded, but they only fulfill one part of what farmers need. Just imagine the best case example: Let’s say local farmers in Vietnam, Indonesia, or the Philippines uses all the solutions of their local agri-tech – the education, the data analytics, the tools – and improves their yield by 15 per cent.
That may sound like a significant difference, but that is not a monthly increase. Since farms produce harvests only several times a year, this increase is a lot less than it sounds. Farmers will still have to work very hard to save enough money to actually grow their farm as a business by investing in more land, labour, or other resources. To borrow terminology from the startup world, these farmers have to bootstrap.
The credit gap in agriculture
A much better approach – to borrow terminology from the startup world again – is for them to gain access to capital. A capital injection would allow them to grow their farms much faster, and in turn, enjoy the improved standards of living that will come from growing their subsistence farming into an actual agribusiness.
Unfortunately, most farmers lack access to any form of capital, due to a plethora of reasons. Some lack financial literacy and do not know what loans are.
Also Read: A to B: Agritech accelerator AGrowth now in Bangkok
Others live in areas that may be beneficial for crops but are remote from banks. Those that do have financial literacy and have access to banks may not have the required personal data or financial documents. The lucky few who are able to get a loan are often subject to predatory loans that are so high that they often end up paying only the interest month-after-month and cannot chip away at the principal.
Given the credit gap in agriculture, agritech must also focus on the financial aspect of the business. Coupled with traditional agritech solutions, finance-based ones will serve as a force multiplier, accelerating farmers out of poverty and into prosperity.
Some of the earliest finance-based agritech solutions take the peer-to-peer lending model and apply it to the field. One such example is i-Grow from Indonesia. Farmers receive capital from investors to grow their farming operations, and they, in turn, get a return of 9 to 13%. Apart from facilitating the actual investment through its platform, i-Grow also enables investors to monitor the growth of their crops through an app.
Fintech startup to pilot solution in ADB-backed project
But just as fin-tech has itself evolved from simple digital wallets into full-fledged ecosystems, so, too must finance solutions in agritech leap forward in capability. One of the most promising solutions toward this end is by the agri-fintech startup Asenso from the Philippines. Leveraging bleeding edge technology like artificial intelligence, chatbots, and natural language processing (NLP), Asenso is building a platform that helps MSMES in general and farmers in particular access capital with fair interest rates, an integrated supply chain that lowers the cost of agricultural inputs, a marketplace to help farmers meet their direct customers, and microinsurance protection for a sector that is to begin with, highly vulnerable.
Asenso’s platform is designed to turn farmers who are just living off their land into agripreneurs who are profiting from a real business. Backed by CARD MRI, the country’s largest microfinance institution and Talino Venture Labs, an enterprise venture accelerator focused on building inclusion-driven startups to address underserved markets, Asenso has the strategic support to scale its ecosystem.
Also Read: This agriculture tech company helps plants to absorb more water
The company also recently bagged the top prize at the Asian Development Bank’s Global AgriFin Innovation Challenge, which aimed precisely to vet digitized end-to-end solutions from the agri-fintech community that would address smallholder farmer needs, tied in by digital financial services. ADB challenged the community as to how frontier technology can help smallholder farmers, who contribute up to 80 per cent of food supply, a transition from subsistence farming to sustainable agribusinesses.
At the heart of Asenso’s winning solution is an AI-driven credit scoring system that builds from payment behaviour and blends unique scoring factors specific to the 760,000 farmers within its network. This allows Asenso to instantly provide capital, store credit lines in digital wallets, and leverage the combined buying power of farmers.
Asenso’s win came with the chance in fact to pilot their platform in an ADB-backed project in the region.
One hopes that finance-based solutions like i-Grow and Asenso will succeed at helping farmers, so there can be a paradigm shift in how we think of agritech. We must not only look at how to improve the growth of crops – we must probe deeper toward the root causes that keep farmers locked into the cycle of poverty.