How Data Can Improve Agric Lending Repayment in Nigeria
Capital is one of the most important components of production, be it manufacturing, technology, agriculture etc. The bread we have in our fridge, the onions in the basket near the cupboard, everything is powered by capital. If capital is this important to businesses, how then do farmers in rural areas who often do not have easy access to banking institutions get credits which ensure they continue producing and feeding the nation?
Government Subsidies and Lending
Governments around the world support farmers, to ensure they continue producing. A failure of farmers to produce crops during a farming season, leads to an instant gap in the economy. Governments understand this and often package single digit inflation loans for farmers. Government lending to farmers is often a social impact effort than an economic effort.
Some farmers do not often have it in mind to pay back what they owe. This does not only cause the government bad debts, but also discourages the farmers from farming for the season during which they have enough cash supply. This is especially true for farmers whose sole aim of farming is to generate income.
It becomes important for the government to embrace data in giving loans to farmers, to ensure sustainable lending practices and yield for the country. With data, the government can work with farmers who are more likely to repay the loan having excelled in indicators like favourable soil type, weather, superior seedlings and farm inputs, excellent farm practices etc.
Banking Institutions
These are key players in the agric lending ecosystem across Nigeria. They often partner with the government through the CBN to give out soft loans to farmers and other targeted industries and sectors. Soft loans are loans whose terms of repayment are relaxed and built around the farmer’s farming cycle. Banks want profit, but governments want food safety, so they partner to disburse these loans that meet both of their needs.
A key challenge for banks remains bad debts. They need to recoup the lending for the last cycle, so they have a financial justification to disburse more funds to the farmers for the next cycle. Farmers often do not default on bank loans as much as they do for the government loans. However, the risk of default is still high with bank loans. Banks tend to depend on data to ensure they lend to farmers who can repay the loans. But, how current and correct are these data?
Farm Cooperatives
Nobody understands the farmer better than the farmer cooperative. When thousands of farmers band together to solve a key problem like credit, they often succeed. However, personal interests tend to get in the way along the line. Except for structured cooperatives, the path to the history of agric lending is littered by Cooperatives which couldn't see their first decade through.
Due to the low literacy level for most farmer cooperatives, it's often difficult for them to adopt and use data and technology to improve their yield. It becomes important that governments, financial institutions and other key players work to support cooperatives to continue to grow.
Agriculture Technology
Financial technology organisations have sprung up in the last decade, especially those focused on supporting Agricultural extension effort from seed procurement to even lending. Some of these technology companies work directly with farmers, teach them their various platforms and follow up till they’re able to operate mobile apps where they can purchase inputs or sell their crops. They also teach them how to collect farmer-friendly loans on the platform using tools like USSD.
Agriculture technology companies receive support from their social investors, governments and donors. They’re often the closest to the use of data in ensuring standard practices in agric lending.
Meadows Foods and the Use of Data in Farm Lending
Recently, Agric techs have become the farmer’s closest driver towards digitization of the agriculture value chain in Nigeria. At Meadows Foods, we aspire to solve global food challenges by partnering with our local communities to create growth. One way we do this at Meadows foods is through data.
We collect data on the farmer, soil type, geography, weather, external factors affecting farm yield, crop type, etc. We crunch these data to help lending institutions, governments and agric techs to give sustainable loans to farmers. All of these data points have been successful in our understanding of the key determinants of farm yield and by extension, loan repayment. This way, we ensure that the farmers who can feed the nation, have the resources to continue producing.
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