Financing and Consulting for Low-Income Farmers
A new vision on how to help small farmers rise to the next level through technology.
The World Bank reported that an average Latin American will not attain the same living standard that the average person in the developed world had in 2010 until 2050.
There is a unique opportunity to provide underserved farmers with seed capital; financial risk-management through product diversification; and technical training in sustainable, agricultural best-practices. This agriculture endeavor will have a formal triple-bottom line charter that reconciles the for-profit vision of traditional institutions with the long-term social and environmental goals of sustainable development, similar to BNDES’ approach in Brazil. However, a replication of BNDES’ model of issuing collateralized rural loans will not solve many of the problems that leave people on the edge of poverty. I envision training farmers in crop rotation, soil preparation, and cash management, thereby creating a buffer between success and failure.
There are three parts to this vision:
- Financial crowdfunding: Farmers in the region specialize in a variety of row and permanent crops. Most of them own small plots of land, but there are ample amounts of cooperatives one could initially target. These cooperatives are highly organized and could be better subjects for credit “à-la-Kiva.” Think Quinoa cooperatives in the Andean region or coffee growers in Brazil. The credit would be collateralized by either the agricultural output, other growers in the coop or the land itself (for jurisdictions where foreign entities are legally allowed to hold land in the case of default). Interested parties could create profiles for their projects and raise money based on users coming into the platform seeking to donate funds or demand a particular return for their capital.
- Training in Agricultural best-practices and financial management: Farmers participating in this platform will have to complete a certification process. Upon the successful conclusion of this program, certified farmers would be able to access the platform’s financial crowdfunding tool. This training is intended to bridge the trust gap between the capital providers and the farmers. Lenders/donors know that a third-party has trained and tested farmers on fundamental knowledge. Farmers are prepared to make a more informed decision with regards to financing their next crop cycle.
- Data pooling: Big data is only prevalent in developed markets and for big operators in emerging countries. Small farmers are not mechanized with big and capital intensive equipment. Nevertheless, coops could make good use of external capital to bring in machinery and collect data that enables their members to make better operational choices. Furthermore, acquiring high tech machinery would enable them to have access to platforms such as John Deere’s (discussed earlier this semester) or better leverage data coming from other sources like Farmers Business Network or its local equivalents.
A platform like the one proposed could transform the way agriculture is done at the margins of the revolution that agriculture has experienced in the last couple of decades. The vast population shift from rural to urban life is a reflection of the incredibly tough conditions in which farmers have to live and operate. Furthermore, climate change is making matters worse and desertification is challenging their ability to operate at sustainable levels. Thus, it is imperative to find creative solutions to the challenges ahead. It is through the formidable power of technology and crowds that we could finally make this dream a reality.
Student comments on Financing and Consulting for Low-Income Farmers
Super interesting post Techie. How would your platform deal with allocating funds between different farmer’s projects? I’m guessing that all farmers have fairly similar projects and I also believe creating an amazing crowd-funding campaign is outside the core competency of most small farmers. How would your platform address this issue while preserving it’s social mission?