Fintech defines new trends in financial services offerings for farmers

By 2020, consumers may not turn to banks to get the financial services they need. We are already seeing other companies invading the space traditionally reserved for financial institutions. The reason? “Fintech” – financial technology – which is innovative new technology and software aiming to compete with traditional methods in the delivery of financial services to the consumer.

For those who might not know what Fintech is, it’s simply the use of software solutions for financial transactions – global examples include Google Wallet, Apple Pay, Wonga and a myriad of other solutions that are offered online or via mobile phones. Some examples include M-Pesa, SnapScan and Nomanini, to name but a few. To indicate the scale of Fintech, back in 2014 already, investment in the US had tripled to $9,89 billion, with Europe investing $1,5 billion.

The disruption caused by Fintech has changed the banking world as we know it. The Financial services industry has been in existence since the 14th century and has always stood the test of time. However, recently it has had to adapt to keep up with the technology evolution. This Goliath has no doubt been shaken up by modern technology’s David – the Fintech revolution.

For traditional financial institutions, the risk of disruption is real, as Fintech companies use the internet, mobile phones, cloud computing and open-source software to make banking and investing more efficient. These Fintech start-ups offer existing financial services at lower costs and offer new tech-driven solutions, not previously available and driven by traditional banks. Financial institutions – both legacy and start-ups – are also driving technology-focused solutions such as peer-to-peer payments, crowdfunding, mobile payments and transfers, and on-demand insurance. Examples here include Avant, Lending Club, Qufenqi, Affirm and SocietyOne.

What does Fintech mean for agriculture?

For agriculture, the rise of Fintech means easier access to funds, new competitors in financial services and a global reach. Selling cattle or produce? Fintech and digital markets can now connect farmers directly to buyers on a mobile platform, doing away with the middleman. Important to note is that Fintech not only minimises the dependency on traditional banks as the middlemen, but increases the use of peer-to-peer lending, growing and strengthening the sharing economy model. Good examples are M-Pesa and FarmDrive in Kenya, where FarmDrive connects smallholder farmers to loans and financial management tools through their mobile phones.

In Mozambique, the Institute of Cereals of Mozambique (ICM), which is responsible for regulating and promoting agricultural production and commercialisation under the remit of the Ministry of Industry and Trade, recently joined forces with FinComEco to link agriculture to the latest financial technology.

The collaboration will develop a range of projects and high impact initiatives in the agricultural commodity markets sector. ICM, with its Mozambique domain knowledge, countrywide network of warehouses facilitating smallholder farmers, traders and buyers, will deliver commercialisation and operational capabilities. FinComEco will provide the commodity trading platform and electronic warehouse receipts capabilities, as part of the wider FinComEco model. This includes distribution of third party agri-finance and electronic banking facilitation enabled by scalable technology supported by its partner GMEX Group

In South Africa, PICSA is a ground-breaking organisation whose primary aim is to responsibly protect and assist the lower-income active population through the provision of credit solutions. At the core of their offering is the savings platform, offering members real returns by saving as little as R25 a month. Their comprehensive products scale to cater to every stage of the saving journey, thereby contributing to the financial well-being of employees in the agricultural sector.

With the pace of technology developing so quickly, it is difficult to say what the next 10 years will look like. For agricultural financial services and its customers, it may mean the possibility of loans backed by cryptocurrency – currencies such as Bitcoin, a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer – by 2025. What is important though is that AFGRI as a company, the agricultural sector as an industry, and South Africa as country do not get left behind.

 

For more information on innovation in agriculture, contact AFGRI Technology Services on ats@34.255.249.49.

 

Sources:

https://www.forbes.com/sites/bernardmarr/2017/02/10/a-complete-beginners-guide-to-fintech-in-2017/#367c7d873340

http://www.huffingtonpost.com/entry/what-is-fintech_us_58a20d80e4b0cd37efcfebaa

http://www.business2community.com/finance/5-fintech-firms-reshaping-lending-financing-01701485#bUsBMMz8YWzzADyH.97

Digitisation set to transform the agricultural value chain in Africa

Along with many business processes in organisations, value chains are undergoing a digital transformation. In Africa, the digitisation of agricultural value chains is expected to make the greatest impact in the area of financial services, making these more accessible to farmers, especially small-scale and rural farmers. It will also help to connect buyers and sellers more efficiently.

To give you some background, generally agriculture value chains consist of the following players, although these can vary depending on the type of crops being produced, as well as the location:

  • Input providers supplying raw materials such as seeds, fertilizer and pesticides
  • Farmers who manage the production of the agricultural product
  • Associations and cooperatives who organise many individual small-scale farmers into groups to negotiate better prices with buyers and provide extension services
  • Buyers who purchase the agriculture product and sometimes undertake the processing, packaging and marketing of the final products
  • Customers who ultimately consume the products

In reality, agricultural value chains are often quite multifaceted, and perhaps more so in Africa where role-players often perform more than one role. For example, buyers can also be input providers when the farmers they work with don’t have a reliable supply of inputs. In many cases, buyers also supply loans for these inputs. Middlemen can also confuse the issues by buying directly from individual small-scale farmers and then selling in bulk to more established companies.

However, the focus of this article is on how digitisation will assist small-scale and rural farmers who currently find it difficult to get access to financial services. There are several successful examples of this throughout Africa: for example, Colombia Coffee Growers Federation in Ghana issued ATM cards to 82% of its outgrowers (farmers who are contracted to produce for a specific buyer), helping it reduce disbursement costs by up to 79% compared to cash, a saving of $15.5 million.

In Tanzania, Multiflower, a seed and cuttings exporter, embarked on pilot programme in 2013 where they issued loans totaling $6,000 to 200 farmers and paid $67,000 to 300 farmers via M-Pesa. Apart from affording each farmer an additional and simple method for accessing credit, the switch from cash to digital payment resulted in an average saving of $10.75 in transport costs and 8 hours per payment per farmer. Over the duration of the pilot, participating farmers saved a total of approximately 6,000 hours because they didn’t have to travel to collect their payments.

Another group who stand to benefit from digitised value chains are buyers of agricultural products. This will considerably lower the costs of withdrawing, transporting, and distributing payments – either to farmers directly or via associations or cooperatives. This is particularly true in Africa, where agriculture value chains are often characterised by a small number of buyers paying many farmers spread out over a vast geographic are working through a complex network of middlemen and traders.

Here an example is MasterCard which worked with its partners to develop and implement a range of financial tools to digitise the agricultural value chain in East Africa: 2KUZE in Kenya, and eKilimo in Tanzania. 2KUZE, which means ‘let’s grow together’ in Swahili, is effectively a digital agricultural marketplace targeting Africa’s small-scale farmers, agents, large-scale buyers and financial service providers; eKilimo means ‘eAgriculture’ in Swahili and serves the same function in Tanzania.

Streamlining the value chain in the agricultural sector will undoubtedly impact not just the industry, but the entire economy meaningfully – ultimately enabling small-scale farmers to access formal financial services that they previously may have been excluded from. This will go a long way towards driving financial inclusion and food security.

A value chain is the range of steps and related actors necessary for an agriculture product to move from the farm to the final customers. Value-chain finance includes any or all the financial services that flow to and/or through the chain to address the needs and constraints of its participants in accessing finance or procuring products.

For more information on innovation in agriculture, contact AFGRI Technology Services on ats@34.255.249.49.

Agtech to bring about the second “Green Revolution”

As the issue of food security takes grip around the world, agricultural technology (Agtech) is set to become one of the most impactful uses of modern technology, in that it is changing how we grow food. Fundamentally, it has introduced the second “Green Revolution”, putting to use real-time data and innovative technology to ensure effective farming practices and improved yields.

The post-war transformation of agriculture, known as the first “Green Revolution”, was led by American agronomist Norman Borlaug, who developed high-yielding varieties of cereal grains and the distribution of hybridised seeds, synthetic fertilisers, and pesticides to farmers. Borlaug’s contributions, as well as the widespread buildout of irrigation infrastructure and the adoption of modern management techniques, greatly increased yields without requiring an expansion in agricultural land, saving more than a billion people from starvation. Now, a second revolution, built largely on technologies that comprise precision agriculture, promises to make the farm of the future more productive and efficient.

With precision agriculture, farmers and soils work better, not harder. Think about precision agriculture as being ‘site-specific’ and ‘information-specific’, as in the most precise way of informing farming decisions. That is, farmers can take large fields and manage them as if they are a group of small fields through gathering information from the fields in real-time by observation and measurement, then responding to inter and intra-field variability in crops. This reduces the misapplication of inputs and increases crop and farm efficiency.

 Why is this so important? In South Africa alone, we face a massive challenge to feed our population. In 2009, the population was 49 million and is expected to grow to 82 million in 26 years. Food production must intensify and more than double to feed the expanding population using the same or fewer natural resources. The result, there is shifting trend towards intensified agriculture, which can only be brought about using Agtech. This is a global phenomenon as each country looks at innovative ways to deal with the problem – not only in production, but across the value chain.

Agtech innovations include satellite mapping, drones, Internet of Things (IoT) and robotics. In 2014 alone, investment in agricultural technology surpassed investment in Fintech; $2.36 billion and $2.1 billion respectively. The growth potential is monumental particularly because Agtech will seek to find solutions to mitigate against climate change, increasing population growth and land scarcity. An example of this level of investment is with John Deere – the company has recently made an acquisition of an agtech startup, Blue River for $305 million. Reason being that Blue River’s has created technology that uses computer vision and machine learning to help growers reduce the use of herbicides; while conducting analysis on each plant to determine if it is a weed.

The eight main categories of Agtech include:

  • Farm management software;
  • Precision agriculture and predictive data analytics;
  • Sensors that help farmers to collect data and to monitor crop health, weather and soil quality;
  • Animal data – software and hardware specifically aimed at better understanding livestock, from breeding patterns to genomics;
  • Robotics and drones;
  • Smart irrigation;
  • Next gen farms, where technology is used to provide alternative farming methods to enable farming in locations and settings that previously couldn’t support traditional farming; and marketplaces (technological platforms that connect farmers directly to suppliers or consumers without any middlemen).

Some of the most significant technological advances that are already revolutionising the agricultural sector in Africa include:

  • Water-saving sensors comprising networks of wireless sensors and smart water management systems;
  • Precision drones used for crop spraying in unmanned helicopters, precise aerial photography, soil and water surveys and spraying and watering assistance;
  • Chemical-free pest control – including systems that can trap, count and monitor pests, systems that trigger the release of EPA-approved pheromones that disrupt pests’ mating cycles, and real-time field monitoring and targeted, automated responses; and
  • Farming automation and management systems including interconnected machinery, machines that can inject fertiliser at precise depths, automated seed-spacing based on soil fertility and machines that measure harvest data in real-time.

Technology that increases the efficiency of farms has come a long way since the days when tractors and ploughs were the most important agricultural machines. More importantly though, it’s about food security and feeding the world’s burgeoning population. It’s also about sustaining profitable production – producers need to use the latest technology available, from seed to chemicals and mechanisation to training, including precision agriculture. It’s a case of maintaining a competitive advantage in a competitive global agricultural market; it’s not just a ‘nice-to-have’. And finally, it’s about reducing our impact on the environment too.

For more information on innovation in agriculture, contact AFGRI Technology Services on ats@34.255.249.49.

Sources:

https://en.wikipedia.org/wiki/Precision_agriculture

http://www.engineeringnews.co.za/article/iot-could-help-increase-agri-productivity-by-70-says-deloitte-report-2016-05-03

http://www.precisionag.com

http://34.255.249.49/geoagro/ 

http://www.planet.com

https://techcrunch-com.cdn.ampproject.org/c/s/techcrunch.com/2017/09/06/after-scraping-monsanto-deal-deere-agrees-to-buy-precision-farming-startup-blue-river-for-305m/amp/