Open Letter — Reinventing Agriculture Finance Through Data

By Aline Oliveira @TrAIve Finance

Photo by Clay LeConey


I am Aline, one of the co-founders of Traive, a company that emerged inside the labs and classes at MIT two years ago, aiming to improve the agriculture finance industry through technology, data, and passionate people.

As I am writing this, the world is experiencing one of the most tragic chapters of its history with the COVID-19 pandemic tearing apart families, communities, industries, and countries.

This pandemic has been imposing a challenging environment for the agriculture supply chain, which is dealing with a chaotic scenario: depressing prices, a sharp reduction of crude oil prices, temporary interruptions in food processing and distribution channels, and lack of credit. All this combined has been amplifying the pressure on the entire food system.

According to FAO, in 2018 roughly 2 billion people (26.7% of the world population) derived their livelihoods from agriculture production, food processing and distribution. Disruptions from climate change-related disasters and COVID-19 are expected to lead to lower production and an exponential increase in food waste due to blockages to transport routes and less demand for fresh produces (estimated to be about 45% of all fruits and vegetables, roots, and tubers — quite high!).

Therefore, now more than ever, Traive’s mission couldn’t be more relevant. Access to credit and financial resources is crucial at times like this to keep the world fed and pave the way to economic recovery.

Traive was born with the mission to create technology that eliminates the fears and inefficiencies of investing in this industry. We deliver powerful yet simple financial solutions, because running a farm or agriculture-related business is already hard enough!

Our vision is to create a sustainable agriculture value chain by providing technology that eliminates the useless costs, transaction time, and perceived risks of providing farmers credit. Therefore, the gains captured by the ecosystem of input suppliers, merchants, and financial investors — through more affordable capital — will translate to increasing investments in small to medium farming communities, ultimately contributing to the growth of sustainable agriculture practices.

Agriculture is hard and a complex system (also for regular lenders!)

The need for additional liquidity in agriculture is not new. Access to sufficient and adequate financing has been a challenge in developing countries for decades.

This is mainly because understanding agro-economics is not an easy job! Data is scattered, fragmented, unstructured, and the amount of it that needs to be collected, processed, and interpreted for a credit investor to make an informed (and unbiased!) decision is massive.

Therefore, most financiers perceive agricultural finance as a low profitable and high (actual and perceived) risk business, and consequently, they raise interest rates, tighten lending criteria, shorten terms, impose onerous lending terms, and often shy away from lending to agriculture at all, seeking more stable returns from other sectors of the economy.

For the few financiers operating in this industry, on top of the challenges above, the remoteness of rural clients coupled with poor connection infrastructure, and lack of good quality financial reports imply the necessity of higher transaction rates, higher interest costs, and over-collateralization. Generally, in the small to medium farmer segment, financiers require anywhere between 150%-300% in collateral, which dramatically decreases farmers’ capacity to tap on those credits, creating an enormous underserved market.

Efficient, dynamic, and data-rich technologies are required to bring solutions to these broken relations. Traive is a growing company that provides the agriculture supply chain a unique approach to data and credit risk monitoring through a mobile, online and in-store point of sale financing technology. Our solutions enable a growing ecosystem of inputs merchants, farmers, inputs companies and financiers to achieve their key objectives: (i) merchants and inputs companies sell more goods and services; (ii) farmers obtain convenient, compelling financing options with the ability to transact instantaneously; and (iii) financiers grow a diversified portfolio of agriculture investments, with a low transaction (and no infrastructure) cost.

What started at MIT as a research project has become some of the most advanced AI applications in the industry. Our models predict events of delays and defaults and help investors diversify their risks, optimize portfolio returns, and still achieve profitable margins while charging less.

What is unique about our approach is not only the high accuracy of predicting events, but our capacity to explain the factors and drivers that go into these models to financiers and farmers. Our objective is to help lenders better deal with farming risks, and to empower farmers by letting them know how they are being assessed and what they can do to improve.

We have built a truly unique database and designed our technology to cater to omnichannel merchants, banks, and distributors, and our ability to enable channel-agnostic financing solutions with refined user experience has already proven to be a strong product differentiation.

Financial services have long been disrupted by technology, both in the way institutions offer financing, and in the way consumers seek it. This trend is no different for agricultural finance, especially with farmer’s purchasing habits finally shifting from offline to online — exponentially accelerated with COVID-19 effects .

Last, I want you to understand why our company has been able to deliver and accomplish our goals: our team. Although, in the past years I became an enthusiast of machines, I do believe in the principle of “minds over machines”, and more valuable than all our data and technology, the team is impressive and makes me very proud! A strong culture centered around people is the cornerstone of our company. There are not so many (yet!), but they are brilliant, passionate and very motivated to deliver the vision.

We are still in just the beginning, but I can clearly see Traive driving the future of agriculture finance in many ways, advancing the ever-changing way finance is conducted.

So far, despite all expected hard challenges of a startup, we’ve been able to pave our way to achieve our vision, which is ultimately to help people to invest in the production of their food and contribute to a sustainable agriculture value chain.

To all our current — and soon to be — customers, we are committed to make your lives, your jobs and your businesses better!

Empowering Lenders to Help Farmers Thrive!