Absa, South Africa’s largest agricultural lender, has heralded the potential of new technology to transform the financial prospects of smallholder farmers and SMEs who have traditionally struggled to access capital. Origin Digital, a pioneering ag-tech company, is poised to reshape the agricultural credit landscape across Sub-Saharan Africa by providing innovative solutions to long-standing challenges faced by these farmers.
The majority of the world’s estimated 608 million farms are operated by smallholder and SME farmers, who have historically encountered difficulties in securing credit due to factors such as unreliable data and vulnerability to climatic shocks.
However, Origin Digital plans to bridge this gap by utilising predictive analytics tools that leverage geospatial technology, artificial intelligence, and agricultural expertise. These tools enable lenders to assess credit risk and make well-informed loan decisions based on remotely generated historical and in-season farm performance data.
Field-level analysis of crucial indicators including crop yields, cropped areas, and planting and harvest dates provides lenders with valuable insights into financial status, risk assessment, and creditworthiness.
Jon Rhymes, head of Origin Digital, emphasises the transformative potential of this technology: “The convergence of geospatial technology, artificial intelligence, and agricultural expertise is now offering unprecedented visibility into past, present, and future performance in each field. This has the potential to transform the sector by enabling and accelerating credit decisions where previously there was little information available.”
A noteworthy advantage of Origin Digital’s technology is its remote and scalable nature. Lenders can economically assess the performance and risk of smaller farms without the expense of sending assessors to challenging or distant locations. This accessibility unlocks opportunities for lending to farmers who were previously considered uneconomical to serve due to the high costs associated with gathering data to prove creditworthiness.
The financing gap for smallholder farmers in Sub-Saharan Africa is estimated to be around $74.5 billion, with a staggering 83% of this need remaining unmet. This underscores the significance of Origin Digital’s innovative approach.
Absa, in recognition of the technology’s potential, earlier this year partnered with Origin Digital to showcase it at the Nampo Harvest Day agricultural show in the Free State.
Abrie Rautenbach, head of agribusiness at Absa, explains: “The potential is enormous. By using these predictive analytics, we believe this is a route to trust in a production-based working capital model and being able to provide credit without being overly reliant on the information provided by the farmer.”
Improved access to credit, technical assistance, and market opportunities has the potential to increase smallholder farmers’ yields fourfold, according to estimates by the International Monetary Fund (IMF). This not only contributes to regional and global food security but also reduces the need for additional cropland, preserving vital land for habitat conservation.
Daan du Plessis, managing director of micro-cooperative For Farmers East, highlights the transformative impact of technology on credit accessibility: “Getting credit has always been a challenge. But now, technology is making it easier for banks to access our farm yield data in a more trustworthy manner. This reliability means it’s faster and more straightforward to have a credit conversation. This can take farmers from surviving to thriving.”
In conclusion, the confluence of technological advancements, including satellites, AI, and agricultural expertise, is ushering in a promising new era for sustainable and profitable farming. With the potential to bolster yields, enhance food security, and boost profitability for smallholder farmers and SMEs, Origin Digital’s innovative solutions are poised to reshape the agricultural landscape for the better.