Bringing Financial Inclusion and Greater Productivity to Farmers

South Africa’s largest agricultural lender, ABSA, says new technology has huge potential to unlock capital for smallholder farmers and SMEs who have previously had limited access to finance

Pioneering ag-tech company Origin Digital is poised to help lenders revolutionise the agricultural credit landscape in Sub-Saharan Africa and drive growth in the sector.

Providing credit to the smallholder and SME farmers who operate over 80% of the world’s estimated 608 million farms has long been a challenge[i]. Not only is there often no independent, reliable data that can be used to verify historical land productivity and assess credit risk, but smaller farmers can be more vulnerable to shocks that may occur during the growing season such as extreme weather events or pest outbreaks – both of which are becoming more common due to climate change.

Origin Digital plans to bridge this lending ‘insight gap’ through predictive analytics tools that enable lenders to assess credit risk and make better informed loan decisions based on remotely generated historical and in-season farm performance data. Field-level analysis of key indicators such as crop yields, cropped areas, and planting & harvest dates unlocks valuable insight into financial status, risk, and potential creditworthiness.

Jon Rhymes, Head of Origin Digital, says: “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.

“Crucially, the remote and scalable nature of Origin Digital’s technology means that lenders can economically assess the performance and risk of smaller farms without the cost of sending assessors to site, often in hard-to-access locations. This can unlock entire new categories of lending to smaller farmers who previously would have been uneconomical to serve due to the high cost of gathering data to prove creditworthiness.”

Recognition from South Africa’s largest lender
The gap between the amount of financing smallholder farmers need and what they are able to access is currently estimated at $74.5Bn in Sub-Saharan Africa, with 83% of need unmet[ii]. As such, the potential impact of Origin Digital’s technology has already gained recognition and support from major players in the agri-finance market.

ABSA, South Africa’s largest agricultural lender, recently partnered with Origin Digital to demonstrate the new technology at the prestigious NAMPO agricultural show. Abrie Rautenbach, Head of AgriBusiness at ABSA, says: “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. This should allow us to reach out to smallholder farmers and SMEs who have previously had limited access to finance.

“How we incorporate technological advances such as these can transform the way we service our Agri customers. We’ve been evaluating how we might best use these tools for years. It seems that we are closer than ever to making credit more accessible.”

Smallholder farmers could increase yields fourfold (IMF)
For farmers, greater access to capital provides more opportunity to adopt modern agricultural practices, such as precision agriculture, integrated pest management, efficient irrigation systems, and use of higher-quality climate-resilient inputs.

Indeed, the International Monetary Fund (IMF) estimates smallholder farmers could increase their yields fourfold with improved access to credit, technical assistance, and market opportunities[iii]. This would not only contribute to regional and global food security but also reduce the need for additional cropland, preserving valuable land for habitat conservation.

Farmer perspective
“Getting credit has always been a challenge,” says Daan Du Plessis, Managing Director of micro-cooperative For Farmers East, even as he has grown his business to over 2,000 hectares of wheat, soya beans and potatoes. “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.”

Rhymes adds, “The technology-enabled transformation we’re starting to see in agricultural credit offers hope for the future. The potential to unlock increased yields, food security, and profitability for farmers like Daan and for many thousands of smaller farming operations is vast.

“In the face of daunting global challenges, the convergence of satellites, AI, and agriculture heralds a bright new era of sustainable and profitable farming. Working together, we can foster a more resilient agricultural sector that not only meets the food demands of a growing global population but also contributes to the long-term health of our planet.”