When fintech helps producers access finance for the transition to sustainable production

Catalina is a palm oil producer in Colombia using AgroPrestamo

Watch the BBC and MasterCard film about Catalina, HERE.

For smallholder producers on their journey to sustainable farming, access to finance is a key challenge. The implementation of sustainable practices comes with a price tag, but traditional banks see smallholder farmers as too risky. Key constraints are the high-risk profile of agriculture production, lack of reliable on-crop data, high management costs for small-size loans to farmers, and the lack of suitable lending products.

Solidaridad and 4ToldFintech partnered in Colombia to develop a unique, integrated, cost-effective fintech tool that allows financial institutions, off takers and farmers to manage credits for on-farm investments in sustainability: AgroPrestamo.

AgroPrestamo uses artificial intelligence for the digital administration of the credit cycle (granting, monitoring, and collection); allowing real-time traceability of the associated risks. In this way, stakeholders can permanently monitor the credit risk profile of debtors, the use and allocation of resources, payment behavior and other relevant risk factors.

In principle, Agroprestamo serves as a credit scoring tool that integrates the data of agronomic and sustainability assessments of farms using Solidaridad´s Farming and Extension Solution, information on collaterals, and the calculations of household-level cash flow repayment capacity.  Additionally, AgroPrestamo solves the logistical difficulties related to the allocation of resources, monitoring and the collection process; by using digital tools such as electronic wallets, QR codes, biometric validation, among others, for the disbursement, resource monitoring and the collection through the fruit discount.

The fintech solution is now implemented in the palm oil supply chain of Cargill and Oleoflores in the Caribbean Coast of Colombia. As a result, there are now credit related alternative finance products that broaden the opportunities of funding sustainable production projects for farmers. Key advantages are:

  • The reduction of the financial and administrative cost and time for a farmer to get loans

  • The improvement of farmers risk score profile by linking milestones in productive projects to direct disbursement to participants, thereby maximizing impact and reducing risk.

  • Real time visibility to financial entities and sources to the status of each loan distribution, productive project milestone progress, and payments.

This innovation, developed by 4ToldFintech and adapted by Solidaridad for the use in agricultural supply chains in Colombia, was selected by MasterCard as one the most promising fintech to provide rural inclusive finance. “A platform like 4Told can provide access to micro lending capabilities for communities and individuals that are excluded or vulnerable within today´s financial ecosystem”, states Ken Moore, Chief Innovation Officer.

The BBC film features Catalina Zuñiga, one of the users of this fintech tool, who now can understand the impact it has had on her farm business and household. Catalina is a small producer of palm oil fruit, a crop that provides a lifeline out of poverty for millions of small-scale farmers in tropical rural areas around the world. Thanks to the partnership between 4ToldFintech and Solidaridad in Colombia, access to financial products is now a reality for farmers without a bank account.