Cover photo: A smallholder farmer in Kenya, Festus relies on insurance from Pula to mitigate the risk of droughts, pests, and other threats to his crops.
As the pandemic continues to move businesses online, making digital tools more vital for the survival of families and small businesses, some might overlook the importance of the thousand-year-old agricultural sector in building an inclusive and effective economic recovery. Farming and agriculture have long played major roles in reducing poverty and creating economic opportunities, and new technologies are revolutionizing the industry, empowering farmers and agribusinesses to build their financial resilience.
Two thirds of the world’s working poor make a living through agriculture, and smallholder farmers produce around a third of the world’s food. But 235 million farmers, including 115 million women, are unbanked and receive payments in cash, keeping them invisible to financial institutions. And despite the valuable income, food, and economic stability that farmers provide, they face more challenges today than ever.
The pandemic created many obstacles for farmers and agribusinesses, including disrupted supply chains and difficulties storing excess crops, causing them to spoil. Stifled economies and social unrest have further destabilized the already fragmented agricultural value chain.
Climate change poses many threats to farmers and those who depend on them, including increasing rates of floods, droughts, monsoons, and hurricanes, which disrupt supply chains, destroy crops, and destabilize farmers’ way of life. New data from the Center for Financial Inclusion illuminate the impact of climate change on small businesses: a quarter of entrepreneurs in Nigeria experienced a climate shock in the last five years—and those who did took longer to recover from the effects of COVID-19.
Women make up nearly half of farmers but often face discrimination that limits their ability to earn a living and provide for their families. For example, a recent study in Malawi found that social norms and customs constrained female farmers to areas with less fertile soil, leading to lower crop yields.
Advancements in agritech can build an inclusive recovery
The agricultural sector will play a central role in our global recovery from the pandemic, and advancements in agritech can help farmers and other related businesses boost their profits, start participating in the digital economy, and build their financial resilience against future challenges, especially those brought by climate change.
Innovative fintech companies are helping farmers around the world—many of them women—access digital and financial tools that traditional institutions have been unable or unwilling to provide. Accion Venture Lab portfolio company Pula has provided more than 4.5 million traditionally excluded farmers in Africa and Asia with agricultural insurance and data-driven insights to help them sustainably increase crop yields. Apollo Agriculture, based in Kenya, also takes a tech-based approached to help farmers maximize their profits through mobile money accounts, financing, optimized advice, farming products, and insurance.
Agritech innovation is also strengthening the agricultural value chain, benefitting everyone from small farmers to local distributors. In Latin America, Accion Venture Lab has invested in TerraMagna, a Brazilian company that leverages satellite imaging to lower the cost of underwriting and help more farmers access credit. Small farms are often located in remote areas where traditional banks can’t reach, so they seek credit from local agri-retailers that sell seeds and fertilizer. TerraMagna uses their tech-based approach to assess collateral with more precision, lowering agri-retailers’ credit risk and enabling them to provide lower-cost loans.
Similarly, Accion Venture Lab portfolio company AGRIM provides an e-commerce platform for agri-retailers in India. India’s agri-retailers provide more than 120 million smallholder farmers with essential supplies and informal credit. AGRIM connects these retailers directly to manufacturers, allowing access to a wider range of products that can be delivered to their doorsteps at transparent prices. AGRIM also aims to embed affordable lending products for their clients by leveraging unique data from the platform. Since its founding in April 2020, more than 1,000 manufacturers and 100,000 retailers have joined AGRIM’s platform.
Established microfinance institutions are also leveraging new technologies to respond to the effects of the pandemic. Supported by our global partnership with Mastercard, our partner Annapurna Finance in India developed an SMS-based emergency loan product to help rural microentrepreneurs like Papina Das adapt and rebuild. Within three days of applying, Papina received a loan of just 20,000 INR, or $274 USD, which she used to rehire her assistant and restart her dairy farm—and now her sales have nearly fully recovered.
Supporting the most effective innovations
We must continue to support and elevate innovators who are finding new ways to answer the financial needs of underserved farmers and agribusinesses. The potential of innovation is limitless, and underserved small businesses of all kinds need digital and financial tools to recover and grow. Working together, investors, policymakers, and development finance institutions should foster advancements in fintech that are helping farmers, agribusinesses, and other underserved entrepreneurs open economic opportunities in their communities.