Scale Agri-Lending Using Farmland Monitoring
An agricultural lender has two primary concerns (a) accurately assessing the repayment capacity of potential borrowers and (b) monitoring the farmer’s activity post loans to ensure repayment.
Evaluating a borrower’s crop activity is crucial since cashflow from her farming activities will be a significant if not the sole component of her total cashflow.
Ideally, lenders make an on-site visit as part of the application process and at least once after the loan is made to verify the use of the loan. However, in practice, monitoring is often not done because of the cost of visiting small farms in hard-to-reach rural locations. (Monitoring visits are a standard part of a lender’s formal policies and procedures, but it is difficult to verify if visits are actually made by staff.)
Given the small loan amounts of smallholder farms, the ROI of these farm visits is low. As a lender tries to scale, getting to knowing the borrower and the state of her farm becomes an operational bottleneck.
As a result of the high-cost of serving these farmers, lenders only serve clients who exist within a radius, or ‘virtual boundary,’ of their branches or service offices. Farmers who may be good credits, but live outside this virtual boundary, are thus excluded from financial services. Without funds to buy improved fertilizers and quality seeds or a micro-irrigation system, a farmer’s crop yield and income will likely be less than what she could achieve if she had access to financing and quality inputs. Here is a detailed report by IFC on Access to finance for small farm holders.
We recognized the issue of the information gap between farm and lenders early on. Harvesting developed remote sensing and AI technology to bring farm-level information to lenders at their fingertips, helping to make lending operations more efficient and cost-effective, while expanding the potential market beyond their virtual boundaries.
Harvesting’s Dashboard has two components (a) Weather Forecast and (b) Farm Land Monitoring. Standard dashboard features include the tracking of new loan applications, loan repayments, dynamic reports, profile management, integration with Harvesting’s credit scoring solution, and mobile app management.
With Weather Forecast lenders have the ability to view and analyze 5 days of weather forecast for individual farmers. In the case of a severe weather event such as a thunderstorm or hail, Harvesting’s system auto detects them, highlights which farmers may be affected, and computes the potential impact on the loan portfolio.
Farm Land Monitoring provides the unique and innovative ability to assess farm-level activity on a dashboard. Lenders can ‘view’ individual farms on an interactive map and assess crop performance based on features provided by our AI-powered system such as if the field is cultivated (or not), crop health, crop growth status, and soil moisture.
We believe that this cost-effective and timely visibility into the performance of smallholder farms will allow financial service providers to expand their market while also helping millions of smallholder farmers gain access to the formal financial system.
If you are interested in learning more about how Harvesting’s Agri Lending Suite please email us at info@harvesting.co
