Nearly two-thirds of the world’s poor depend on agriculture to survive, and many of these families collect money only once a year, stretching their income from one harvest to the next. But climate change is putting their livelihoods in peril — as global surface temperatures increase, so does the risk of drought, the intensity of storms, and the frequency of natural disasters. Furthermore, our global food supply is at risk because it depends in large part on the productivity of smallholder farmers who live and work in emerging markets. In sub-Saharan Africa and Asia, smallholder farmers provide over 80 percent of the food supply.

In sub-Saharan Africa, nearly half the population lives below the poverty line and depends on agriculture, herding, and fishing to feed their families and earn an income. Their food supply is extremely vulnerable to climate change and the effects of a food shortage can be devastating — malnutrition surges, school enrollment drops, the economy suffers, and lives are lost.

However, when farmers have the ability to adapt to shocks and crises, they can avoid the worst impacts of food shortages. That’s why it’s crucial for farmers to have access to savings accounts, credit, and insurance. For many of us, the idea of saving seems pretty simple: you set money aside in a secure place and earn interest. But, many people around the world lack access to a formal savings account, and less than half of adults saved at all in 2017. Moreover, 235 million unbanked farmers receive agricultural payments in cash, including 115 million women. Since cash is invisible to lenders, it doesn’t generate credit histories and as a result, it prevents families and businesses from borrowing appropriate financing if they need it. In Ethiopia alone, creating a digital agricultural payments system could cut the share of unbanked adults by up to 60 percent.

How agricultural fintechs open opportunities in Africa

Through our early-stage investment initiative, Accion Venture Lab, we’re supporting innovative agricultural fintech startups. These companies build useful tools that give low-income farmers, who are most vulnerable to extreme weather conditions, the opportunity to afford high-quality seeds and fertilizer, save securely, and adapt when challenges arise. 

Formal accounts open opportunities for farmers to access a wider array of financial services, including credit and insurance. Insurance and innovative digital products can help smallholder farmers endure climate risks, improve their farming practices, and boost their incomes over time. Accion Venture Lab portfolio company Pula is doing just that in 11 countries across Africa and Asia. So far, they’ve provided over 3.3 million traditionally excluded smallholder farmers with agricultural insurance and data-driven insights and advice to help them increase crop yields in sustainable ways. This has been a game-changer for Rose Kilonzo, a Kenyan farmer who now has confidence that she can provide for her family no matter the circumstances. 

“When you plant, you have faith it will be taken care of should your crop fail,” she tells us. With a more secure income, she’s looking forward to expanding into commercial agriculture and passing on the trade to her children and grandchildren.

Another innovative tech-based company we are supporting is Apollo Agriculture, an agricultural fintech that helps farmers maximize their profits with financing, farming products, optimized advice, and insurance. Their model combines input financing with sophisticated analytics, remote sensing, agronomic machine learning, and mobile money. This approach opens opportunities for the poorest farmers to purchase high-quality farming inputs, such as hybrid seeds and fertilizer, on credit with flexible repayment terms and post-harvest due dates. 

In addition to financing and distributing agricultural inputs, Apollo Agriculture’s integrated solution includes the necessary training to farm effectively and sustainably. This multifaceted approach ultimately allows farmers to increase their crop yields, leading to greater financial security, better livelihoods, and a reliable food supply for the world.

Eventually, Apollo Agriculture plans to leverage its technology to support farmers with personalized solutions based on their specific geographical, weather, and land characteristics. In the long term, these customized farming techniques will improve soil quality and curb erosion, which helps boost productivity and sustainability.

A tech-based approached to farmer credit in Latin America

In Latin America, we’re investing in TerraMagna, a Brazilian company that uses their proprietary machine learning platform and monitoring technology to generate a more personalized farmer credit score and an accurate estimate of collateral value. Because family-run farms in Brazil lack access to traditional financial institutions, they often seek credit from retailers where they purchase seeds, fertilizer, and other inputs. TerraMagna partners with these local retailers and uses their tech-based approach to reduce the manual cost of the underwriting process and assess the collateral value with more precision, which lowers the retailers’ credit risk and enables them to provide lower-cost loans.

Lenders in Brazil have typically used land as collateral and have found it difficult to properly accept crops as collateral, given the high fraud risk. Using satellite images, TerraMagna can track the crop status in real-time and help prevent fraud attempts. This approach aligns with our thesis that technology and innovative lending models can work together to create new asset collateral, ultimately granting better access and better credit pricing to family farmers.

We will continue to support smallholder farmers, open opportunities for young people to get into the farming business, and remove the barriers to profitable and sustainable farming for the most vulnerable. As the world’s population grows, so too will our portfolio of partners offering innovative financial and business development services that enable farmers to prosper in a changing climate.