It is estimated there are around 15 million smallholder farmers in Latin America, often producing more than 60% of a nation's basic food supply. But huge numbers of them face substantial challenges in accessing traditional financial services thanks to informality in the sector, geographical isolation and challenging underwriting processes.
These factors have a created a fertile space for agfintech growth in Latin America, led by innovators such as Brazilian company Traive. It facilitates access to capital for farmers via a centralised platform where farmers can manage their entire credit journey, from application to repayment.
The company recently secured $20 million in funding from Banco do Brasil and existing investors, bringing its total funding to nearly $54 million. Utilising AI for risk assessment, Traive employs advanced algorithms to process over 2,500 variables, enabling more accurate and faster credit risk analysis for agricultural loans.
The company also plans to launch a novel credit trading platform designed to bridge the gap between the agricultural supply chain and capital markets.
“Credit without information is just risk,” Traive CRO Arthur Ware told the recent World Agri-Tech South America Summit in São Paulo. “But credit with information is opportunity.”
He explained that Banco do Brasil, via its support for Traive, hopes to increase financing availability for the huge numbers of agricultural businesses accessing traditional credit.
“About 40% of the capital market working needs in Brazil are open for big players in the agricultural supply chain who are trying to sell their own products and are using credit to do that,” he said. “That’s a pretty big number compared to other countries.”
By way of illustration, 80% of sales for Lavoro Agro – the largest distributor of agricultural inputs in Latin America – are on credit. But the credit markets in Brazil are relatively broken. “The monitoring that’s not happening in the credit markets today is leaving companies at risk.”
Advanced technologies such as AI can create thousands of data points to help data analysts make better decisions. This can serve to de-risk credit in the ag sector. The goal of credit, meanwhile, is not zero default, Ware added. The goal of credit is to drive top line revenue growth and expand market share.
Mind the data gap
But data silos – or data that is not easily or fully accessible between groups in the same organisation – remain a problem in the agrifintech sector. That’s because the lack of integration they cause can lead to inefficiencies and missed opportunities in understanding the complete customer journey and operational effectiveness.
Only by breaking down data silos by, for example, successfully centralising customer information, can agrifintech companies unlock the full potential of their data.
The ability to cross share the data that is siloed by farmers, ag businesses and banks is a challenge, noted Ware. “You still don’t know what the other percentage of the market is doing.”
The only way to overcome that, he said, is by tapping into information sources from the big agribusiness using AI modelling to help do that. “We haven’t seen this happen at scale yet,” said Ware. “It’s still a huge problem.”
“Fragmentation of data not just within companies and within the sector itself but across the ag to the capital market sector itself remains one of the biggest challenges.”
