Digital solutions for sustainable smallholder agrifinance

  • Alexandre NAYME, BNP Paribas
  • Speakers
  • David SOLIS, GFA Consulting Group
  • Mariel MENSINK, ICCO Terrafina
  • Dirk LEBE, Swisscontact
  • Davide FORCELLA, Yapu Solutions

    In his introductory remarks the moderator introduced the significance of digital solutions for smallholder farmers and financial inclusion. Agrifinance has been set as a priority for the next 5-10 years by e-MFP. Nevertheless, Alexandre NAYME mentioned that it is important to already start integrating new technologies from today onwards. Hence, this session focused on the opportunities for financial service providers by presenting concrete examples.

    Dirk LEBE, Swisscontact, presented ‘CocoaTrace’. This software application, developed by the Indonesian Ag-Tech company Koltiva, maps the entire supply chain with the aim of improving project management, product traceability and transparency. The cocoa supply chain and business processes are integrated into a cloud-based collaboration platform, connected through a multitude of mobile and web applications. The data collected through this application ranges from sales transactions, poverty and nutrition scores to GPS/polygons. Lebe stressed that data protection is taken very seriously. Information is only shared, for instance with banks, if it is in the interest of and permitted by the farmer. 

    Farmers have access to the data through the app FarmCloud. This provides them with access to inputs, knowledge, finance and markets. When a farmer applies for a loan and has given written consent to share his data, nearby financial institutions are notified. Loan officers with access to CocoaTrace then have a pipeline of farmers who are potentially creditworthy. Another application of this tool is deforestation, as gathered GPS and polygon data allows verfication of farm locations against government maps. Lebe explained that smartphone ownership is one of the challenges. In Indonesia 60% of the farmers below 25 years have a smartphone, while only 3% of the 65+ years old farmers own one. 

    Davide FORCELLA presented research he conducted on the status of agrifinance for smallholders and what financial institutions look for when it comes to digital solutions. The research sample consisted of 150 financial institutions. Most of these institutions see IT solutions as an economic opportunity. It could help develop their rural portfolio by decreasing operational costs or managing (climate) risks. Although the financial institutions show their interest in new IT solutions, not all are eager to use software. Those that do, however, want a structured integrated solution which can be used throughout their entire operation cycle. A particular low acceptance of the use of IT software was seen by loan officers, because their work would shift to training people.

    Mariel MENSINK, ICCO Terrafina, then shared the business cases of the three winners of the Innovators Challenge with the audience. For this challenge FinTech companies were asked to build an application for financial service providers, specifically focused on linking geo-data for agriculture to financial services. The three winners were: 1) Agri-Wallet, a platform which links farmers in developing countries with a secure, instant and near-free global virtual currency account on their mobile phones by using a virtual currency based on blockchain technology; 2) Apollo, which leverages agronomic machine learning, remote sensing technology, and mobile phones to deliver the tools farmers need to increase their yields and the needed credit, without reliance on expensive, manual processes; 3) Van der Sat, a geo-data company, which provides precision agricultural advice to small holder farmers to improve agricultural practices, risk reduction and reduces transaction costs on agricultural loans in collaboration with TARA.

    Mensink continued to explain how ICCO Terrafina is already using geo-data for agriculture in Ethiopia in the form of a credit assessment tool. This tool tracks the costs of agricultural performance and revenues and analyses the risks for MFIs. Mensink emphasised the importance of humans and technology working together by setting out how loan officers are very much instrumental in translating information to the farmers. 

    David SOLIS, GFA Consulting Group, presented the GeoBancoverde app. This tool has digitalised environmental loan monitoring in smallholder finance. Solis started by explaining that MFIs which provide credit to smallholders in Latin America often have to deal with fraud and a lack of spatial information about farm parcels. He explained that the lack of online monitoring systems of farm parcels makes it difficult to avoid financing of agricultural activities which cause environmental damage.

    The GeoBancoverde deals with the aforementioned issues by geo-referencing farm areas and by assessing environmental aspects using satellite imagery of that area. These data are transferred from a mobile phone to a bank’s central server. The benefits for financial institutions include fraud reduction, credit risk reduction, acceleration of the credit admission process; this allows also the online monitoring of the farm area during the whole credit life cycle. Solis pointed out that the application is flexible and could be adapted to other contexts and projects.


    The first question was what the panellists would consider the most important message for financial service providers, who want to digitalise in order to target more smallholders. Mensink replied that the most important thing is to embark on that journey and combine the experiences they already have: working with clients in rural areas and working with data. She added that collaboration is also key, with FinTech companies as well as with market platforms and input providers. Lebe continued by pointing out that digital solutions are powerful but also bear a lot of risk. It is important to avoid the misuse of data, for instance when data is used to willingly over-indebt smallholders who might not be creditworthy.

    The panellists were then asked what has been the most disruptive technology they have seen so far. Forcella argued that it should not be about the technology per se, but more on how you use technology to translate a complex problem in such a way that it becomes simple. So it should be more about managing data and combining what is out there already, instead of coming with a new un-scalable solution to an exact problem. Mensink added that investors are usually looking for easy scalable solutions that have already been proven. The problem, however, is that the development of technological solutions is often still in a piloting phase. It is therefore important to find long-term investors that are with you from the onset, allowing for learning and making mistakes.

    The next question was about which institutions could best adopt these financial technical solutions. Solis replied by saying that MFIs in Peru are in need of specific IT solutions in order to assess risks. Banks have gone bankrupt in the past, for instance because of a lack of available agri-spatial information. Solis also said that technological tools can help to comply with environmental standards. If bank officers have the right tools available it becomes easier for them to assess application against these standards.

    The last question was on the costs of developing digital solutions for agrifinance. Mensink replied that it all depends on what kind of data your solution includes. The more data you provide, the more expensive it becomes. Forcella added that it also depends on who develops the solution. It will be more expensive to develop a solution by yourself and just for yourself than buying a solution that is already out on the market. The problem with the latter, however, is that it might not be customised and you constantly have to pay for the use of it. Solis had a different perspective: developing an application does not have to be expensive, given that a lot of information is freely available nowadays. Forcella agreed on the fact that data is cheaper. In his eyes, however, it is not so much about the data, the key point is how you manage the data. That is where the costs come in.