#488
Trans-farm-ative Fintech
Published:
May 15, 2023
Author:
Sarah Parsons Wolter
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Agriculture fintech has been on the rise. Demand for food globally is expected to increase by 70% by 2050, requiring billions of dollars of investment and technological transformation to achieve. Today, the agriculture market is already massive - over the past 50 years, US farm banks have steadily decreased in number even as total originations continue to increase. In the US, farms contributed over $100b to GDP in 2020, while agriculture-adjacent industries accounted for over 5% of GDP.
In emerging markets, the opportunity is even bigger, as farm and farm-adjacent industries can account for as much as 25% of GDP. However, micro-financing for agriculture in these regions has historically been difficult to underwrite. Administering small scale loans are expensive for traditional banks, and the industry comes with a host of risks primarily relating to weather and uncertainty around yield.
A combination of fintech and AI technology is well positioned to disrupt this market and introduce efficiencies to agriculture lending both in the US and abroad. Satellite data, simulation algorithms and behavioral analytics are just a few ways that large data sets can help improve underwriting models, while innovations in digital infrastructure can reduce loan approval cycles significantly. Payments, banking, payroll, insurance and many others are also well poised for innovation within agricultural communities who have historically been underserved.
2022 saw a wave of agriculture fintech coming to the market, and we’d expect more in the coming years given the size of the opportunity. After all, lots of mouths to feed - November 15, 2022 marked the first time the world population surpassed 8m, and it also happens to be the day 19 year old Spanish tennis player Carlos Alcaraz became the youngest world No. 1-ranked singles player!
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