Farmers, like any small business owners, can’t develop their farms without access to financial services and credit. Without the ability to invest in their farms and agri-businesses, there is no room for growth and expansion, no money to pay wages or buy new tools, and no way to access technology and advancing education. Moreover, for the agriculture industry, economic development is even more essential because of its impact on poverty reduction, food security, and employment in developing countries.
Agricultural productivity is directly connected to the welfare of citizens in many developing countries around the world. In fact, economic growth in agriculture can be up to 11 times more effective at reducing poverty than growth in other sectors. Promoting food security, transferring skills, climate change awareness and investment in agri-business can all be done by decreasing the financial agricultural gap, or the difference between capital available to farmers than what they actually need and deserve.
Driving investment and access to finance are increasingly becoming the main barriers for African agriculture. The International Food Policy Research Institute projects that Africa will add 38M hungry people to the world by 2050, resulting mainly from climate change. In addition, Africa will experience major food shortages by 2020 and an increase in malnutrition. The solution to global hunger will require billions of dollars in private capital and institutional money, meaning that all sectors need to step it up to consider the entire agriculture value chain, rather than just different parts.
As crop yields are estimated to decline globally by roughly 7% by 2030, smallholder farms will be directly affected and forced to comply with threats from unstable markets. Organizations, public and private, will need to financially support these farms in order for them to survive and to continue contributing. In addition to finance and capital, additional investment is necessary in technology, disaster relief, and coverage.
The financial gap in agriculture is complex and requires broad and diverse approaches. These unavoidable gaps need to be filled in order to allow for a sense of security among smallholder farms and financiers. Resources will inevitably become scarce and the opportunity to create financial solutions will lead to solid ground and agricultural stability.
As the opportunity to provide financial solutions to smallholder farms worldwide becomes more tangible, entrepreneurs and investors are beginning to provide remarkable solutions.
Avenews-GT is a web platform for the trade of agricultural produce where small-holder farmers and industrial buyers of agriculture can trade with limited transaction risk and full transparency, at real product price, and earn more on their produce. Users’ digital business profiles aggregate transaction history and trade-related data, making it possible to easily apply for trade finance solutions, working capital, and financial support so users can take part in the global trade of agriculture.
In 2018, the promising start-up conducted a ‘Proof of Concept’ project with a Bank operating across the African continent. By utilizing the Avenews-GT platform and its ability to provide comprehensive trade-related data, the Bank’s agri-business clients can share their digital trade data with the bank. Based on this data, the Bank can assess and analyze the performance of its agri-business clients in order to provide financial services efficiently and in a streamlined manner, without the hassle of processing hundreds of papers.