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Connecting banks to small farmers in Africa

80 percent of the African workforce makes a living from agriculture but many are crippled by a lack of access to capital to grow. How can data and technology be used to give banks the confidence to lend to farmers with no credit profile?

Agriculture is huge opportunity for banks but it is very difficult for them to measure risk so they can make lending decisions, especially to small farmers without a conventional credit profile and in many cases, no national ID system that allows banks to even identify them!

Farmers suffer a lack of access to capital. Many are geographically distant from banking networks and lack access to information that would make them more bankable such as pricing data. Many farmers are not financially literate or literate at all.

At Thomson Reuters we have launched the Bankable Farmer project that sets out to create credit risk profiles for smallholder farmers through partnerships with farming cooperatives, banks, nongovernmental organizations and mobile startups.

Our goal is to try and inject more information into the lending process — giving banks the information they need through nontraditional means to be able to have confidence to make loans to farmers that are credit-worthy but don’t have a traditional credit profile.

What we’re doing is creating a business opportunity for the traditional banking sector. We’re trying to connect the large, traditional banking sector to small commercial farmers in Africa.

Building the picture

A woman from the Daborin Single Mothers Association gathers rice at a small processing plant in the northern Ghanaian town of Bolgatanga, February 1, 2008. The single mothers began their organisation to gain more freedom and financial independence in a district where most farmers live on the equivalent of about a dollar a day, according to Oxfam, which helps fund the women's programme. REUTERS/Finbarr O'Reilly (GHANA)
A woman from the Daborin Single Mothers Association gathers rice at a small processing plant in the northern Ghanaian town of Bolgatanga, February 1, 2008. The single mothers began their organization to gain more freedom and financial independence in a district where most farmers live on the equivalent of about a dollar a day, according to Oxfam, which helps fund the women’s program. REUTERS/Finbarr O’Reilly (GHANA)

We are gathering and analyzing data around farmers that the banks can use as a quasi-credit rating.

There are numerous strands we can pull from. For example, many small farmers already use a mobile money platform for transactions and their activity here can generate insight into the risk they present. Partnering with platform providers to gain access to this data will therefore be important.

We will also look at capturing ambient data around farmers — such as crop yields or weather data — that provide a picture of how well a plot of land is faring. There are even ways you can analyze social media interactions, looking at who farmers communicate with.

At Thomson Reuters, we have the ability to pull from all this data, and combine and analyze it, so we can look at ways to score a farmer.

Part of the project will also be about making farmers more financially literate so they understand the importance of a solid credit history. So we could also provide financial literacy training.

The power of partnerships

Farmers on donkey-drawn carts carry dry leaves as they return from the field in Agadez, northern Niger September 13, 2011. REUTERS/Luc Gnago (NIGER - Tags: SOCIETY)
Farmers on donkey-drawn carts carry dry leaves as they return from the field in Agadez, northern Niger September 13, 2011. REUTERS/Luc Gnago (NIGER – Tags: SOCIETY)

We’re not trying to do this on our own — there are many data providers that have expertise we need. There are organizations, startups, cooperatives and others that we are building relationships with and whose work we won’t try to replicate. We know what we bring to the table — we want pilot partners that can bring their own expertise.

For example, working with farming cooperatives will help Thomson Reuters aggregate information on farmers quickly. We’re not in the business of trying to connect with to farmers directly.

There are also startups that provide farmers with anything from pricing information to tools and training and their reach will be useful to us.

Measuring success

On the bank side, the measure will be how many loans are made, their repayment rate and how valid our scoring proves. Is it getting the types of farmers that banks actually want to lend to?

If Thomson Reuters says to customer bank X that on a scale of 1 to 10, farmer Y has a score of 9, we have to be pretty sure he or she really is a 9.

We will make sure that data are of high quality and well analyzed.

On the farmer side, we would look at how many loans farmers benefited from and how productive they were as a result.

The rollout plan

We have picked five countries to focus on — Rwanda, Kenya, Nigeria, South Africa and Ghana. Right now, we’re further along in Rwanda — we have a team of people there and that’s where I’m focusing most of my energy.

For the data we gather to be meaningful, we definitely need to have a critical mass of at least 1,000 farmers in each pilot. The bank that ultimately will be piloting will also have to weigh in — our approach is very much about co-creation.

Each pilot will likely take a different shape depending on the partners involved. They all have the same fundamental goal but how we actually achieve it will be different. In one country, for example, we might partner with a telecommunications company; in another country with a nongovernmental organization. But in every country there will be multiple partnerships — the government needs to be on board, we need a bank and some mobile component.

My goal is to have one of the pilots up and running in early 2017.

Co-creation and social impact

The thing that I’m interested in as a trend from an innovation perspective is this idea of co-creation. As global challenges and business problems become increasingly complex, we need multiple parties to come together to work on solutions.

I’m passionate about growing our business while also having a social impact. You can do well by doing good. You can care about profit and not be embarrassed about that, but also care about people and the planet.

I see Bankable Farmer as a showcase of what is possible.

Full interview originally published on Devex


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Thomson Reuters in Africa has been empowering regional success for almost 150 years. Providing government, financial, academic and business solutions, and helping to move economies from aid-based to self-sustaining and knowledge-based.

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