International forum unveils revolutionary agric financing options
The ongoing international forum on agriculture value-chain financing has unveiled revolutionary and innovative products which finance houses are using to aid agribusiness investors boost agricultural productivity for the benefit of all.
The forum which is currently holding in Nairobi, Kenya and which run from July 14 to 18, was organised by Technical Centre for Agricultural and Rural Cooperation (CTA), The African Rural and Agricultural Credit Association (AFRACA) and Central Bank of Kenya.
In attendance are about 700 participants with various international organisations such as Alliance for a Green Revolution in Africa (AGRA), International Livestock Research Institute and various finance organisations all over Africa.
Some of the innovative financing products which are currently operating in just few countries with potential usability in other African countries such as Nigeria include
Credit Information Sharing (CIS) system which is a mechanism through which various lenders electronically pool and pull borrower information using centralised (credit reference bureau) databases, with the aim of addressing information asymmetry between borrowers and lenders.
Left unchecked, information asymmetry often results in adverse selection, unsuitable loan products/terms, and exclusion of certain categories of borrowers from the credit market. Agricultural financing is severely affected by lender insistence on physical collateral as a primary consideration in credit decision making and credit risk mitigation.
But CIS will enable farmers to build a credit history for negotiating better credit terms. This is similar to the credit bureau system in Nigeria but in this case it is specifically for farmers or agribusiness investors.
Agrilife Platform owned and developed by Mobipay Kenya Limited is a cloud-based technology platform designed to use mobile phone and web platforms to enable groups of smallholder farmers to access financial services, markets and other services that are relevant to them. Agrilife enables players in the agricultural sector – including banks, micro-finance institutions, insurance companies, cooperatives, investors, and agricultural input providers – to have access to data about farmers’ financial and physical supply chain.
This enables farmers’ credentials to be established, minimises risk and gives the farmer easier access to affordable credit. Farmers are able to use the technology to make requests from their mobile phones/web platforms, and via Agrilife the requests are authorised and service providers are able to react to the request.
Mobipay, on signing up service providers, agrees on a commission, which is transaction based, enabling Agrilife to be sustainable. So far, Agrilife has turned over US$18m and Agrilife is present in Kenya, Uganda and Zimbabwe.
Agrocentral is Jamaica’s first digital agricultural clearing house which utilises Web-to-SMS and SMS-to-Web technology to connect small farmers and businesses. Through AgroCentral, businesses have the ability to source large amounts of crops directly from farmers and farmers will be able to sell their available produce directly to businesses.
AgroCentral facilitates effective linkages among farmers and businesses and operates by using a database that holds complete profiles, on both farmers and businesses. Farmer profiles include farm location, crops grown, supply capability and cell phone contacts.
For businesses, profiles include business location, product requirements and ease of transaction. This information along with the two-way SMS portal allows for efficient communication of market information and exchange of goods.
Ensibuuko is a mobile and web application that integrates SMS and mobile money services to enable saving and credit associations (and other financing organisations) to handle savings and make loans to smallholder farmers.
FarmDrive Limited operates on the fact that more people are becoming interested in farming. They have disposable income that they want to invest, but they do not want to farm. FarmDrive seeks to connect smallholder farmers to such investors.
A farmer keeps records of their productivity, expenses and revenue for the farming activity. This is analysed to reveal performance patterns and build a credit profile for the farmer. Investors are then given access to credit profiles of farmers who have applied for investments and can connect with them.
Farmer Management System (FMS) – Within farmers’ organisations, FMS is a tool through which the credit provided to the farmer is controlled and managed. In doing this, the farmer is given access to accredited input suppliers and the benefit of better prices due to economies of scale. FMS serves as an electronic wallet for the producer linked to specific suppliers within the defined ecosystem.
This electronic wallet has various accounts which enable production and trade transactions to be captured in the detail required by the stakeholders within the value chain. The combination of the electronic platform with the management services creates the FMS – ‘the solution’ which is provided by Vest Farm.
Farmforce is a web and mobile platform built for use by large-scale contract farming schemes composed of smallholder farmers. The system allows company agronomists and production managers to control which inputs growers apply to their fields, ensuring that that approved chemicals are used and that the correct maximum dose, pre-harvest intervals, and maximum number of applications per season are observed.
The system provides support for data collection for international safety and sustainability standards, such as Global GAP. Farmforce has a loan management module which supports cash and input loans calculated on the size of farmers fields. The Farmforce mobile application has a secure harvest purchasing module (including loan repayments) which is integrated with mobile weighing scales and a bluetooth printer for use at collection centres to improve transparency.
The system downloads data online or offline, enabling technical assistants to capture data in very remote areas. The system also provides detailed weekly production forecasts. Farmforce supports low end android mobile phones like the Samsung Galaxy Pocket which are cheap (US$110), portable and easy to use.
There are several others of these innovative financing systems which BusinessDay will be publishing in weeks to come.
OLUYINKA ALAWODE