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Attracting record amounts of capital, South America’s agri-fintech sector has emerged as a land of opportunity that is transforming farmers’ access to rural credit. Innovators and investors share the potential of the tech for a more connected, streamlined, and transparent value chain.
How is agri-fintech impacting growers’ financial capabilities?
“Agri-fintech plays a key role in LatAm as credit is still scarce and hard to obtain, especially to small and medium size producers. Agri-fintechs help amplify the sector’s capacity and working capital needs, allowing producers to invest in new technologies and innovations which will directly contribute to a more efficient and sustainable agriculture industry. At the end of the day, growers need access to capital to grow and constantly improve production and efficiency, which are directly dependent on access to capital in a quick and unbureaucratic way. Agri-fintechs are able to improve the credit offering and the overall efficiency of the credit process through new technologies that facilitate the capital flow to growers.” Flavio Zaclis, Founder, BARN INVESTMENTS
“The agriculture industry financing composition is dominated by a few global very large players, mostly because they are historically well-positioned to assess and manage the peculiarities of the sector, such as logistics. Lack of understanding of the risk components and the difficulty to access scattered farmers are the biggest blockers for more investments. Agri-Fintech’s growth will ultimately address these 2 problems, bringing novel technologies to scale the understanding and mitigation of risks, besides connecting more financiers to the supply-chain, increasing capital offer, and finally bringing down costs to farmers down the line.” Fabricio Pezente, Founder & CEO, TRAIVE
“Agri-fintech can help to digitize and connect the entire agricultural industry and provide transparency to all participants throughout the supply chain. The result is a closer relationship between producers, buyers, lenders, and insurers while at the same time lowering risks on loans and opening up liquidity channels to flow faster, more easily and with better terms.” Luis Macias, Founder & CEO, GRAINCHAIN
We also caught up with two innovators with fresh solutions in blockchain and tokenization improving the financial capacity and sustainability of farming operations:
“Blockchain and tokenization allow the creation of stablecoins backed by farmers’ own produced biological commodities, promise of production or even by derivatives from these commodities. These stablecoins create new opportunities for current and new financing sources in the ecosystem, from traditional banks and agro-companies to basically any person interested in diversifying investment, which ends up improving the farmer’s financial possibilities and, therefore, his capacity. In summary, it allows them to unleash the true value of the commodity as is, since it avoids inflation from outside the agro-ecosystem, reduces market volatility risk, allows farmers to control margins while standing above macroeconomic and political turmoil, and expands to new financing sources. This is how we aim to democratize the access and use of capital through a new asset class that operates in a decentralized, frictionless and cost-efficient new economic ecosystem that empowers productive individuals.” Eduardo Novillo Astrada, Co-Founder & CEO, AGROTOKEN
“We firmly believe that we can create economic incentives for sustainable agriculture via the digitization of carbon credits and its certification process. As we have digitized a historically manual and analogue method for certification, we have created a cheap and automatic manner for land-owners to originate carbon credits from their forests, pastures and soil. Thus, producers can be immediately paid to conserve, protect and promote agricultural best practices, reducing GHG emissions by avoiding degradation and deforestation.” Luis Felipe Adaime, Founder & CEO, MOSS.EARTH
The rapid growth of South America’s agri-fintech ecosystem is drawing attention globally, but how did we get here and where is the industry headed?
“Typically, agtech companies build growth slightly slower than other fintech companies because the distribution market for agriculture is challenging — trading periods are long, and there are many variables involved. Also because they are usually acquired for hundreds of millions (not billions) in their early stages by industry’s behemoths following innovation like an eagle. On top of that, until not so long ago, investors were only looking at innovations in the post-farm and on-farm stages. That could be the reason why LatAm doesn’t have an agtech unicorn yet.
In the latest Radar AgTech Brasil 2020/2021, a document that maps agribusiness start-ups in LatAm’s largest economy, just over 40 start-ups, from a universe of more than 1,500 agtechs, work with credit solutions, barter, insurance, carbon credits, and fiduciary analysis. This also means that the potential of the so-called agri-fintech start-ups is enormous. They are the ones that can play a key role in expanding rural credit and financial services, hence enabling small and medium-sized farmers (the great majority of producers) to access technology.
What gets me excited about it is that, apparently, things are starting to change. Since late last year, we’ve seen start-ups like Argentine Agrofy and Brazilian Agrolend — both agri-fintech companies but with different business models — raising considerably more money than other start-ups in the segment. Moreover, last January, when SoftBank wrote its first check for an agriculture-related start-up, it did for a Brazilian agri-fintech, TerraMagna.” Fabiane Ziolla Menezes, Editor-in-Chief, LABS
“Technological solutions for Brazilian agribusiness need to take into account some peculiarities. The first is the need for internet access and cell phone signal — according to a study by ESALQ/USP, only 23% of rural areas in the country have internet access. And this mainly affects the performance of small and medium producers. The answer to scaling involves cheap technology, which uses little data and focuses on part of the producer that lacks technology, which is precisely in the financial sector. It is also undeniable that the ESG agenda is here to stay. Socio-environmental and governance concerns must be on the companies radar.” Victoria de Sá, Founding Partner, VERT CAPITAL
“Data plays an important factor in expanding credit and capital expansion in the ag world. Data is what guarantees transparency, information, traceability, and inputs that agritechs can use to offer loans in a quick and safe way. The more data available, the better. The combination of increased data and connectivity in the field should be the main drivers to scale capital expansion in the sector.” Flavio comments.
“Digital transformation is what leading players in agriculture are talking about right now, inside, and outside of the farms. All stakeholders understand the need to bring to the sector all the technologies that have been more than validated in all other industries and level up what can be achieved. A natural consequence of that is consolidation, given the investment needed to be deployed in those technologies and the benefits of having a broader network to reach better and faster results. Finally, the venture capital community is shifting their attention to the potential of the sector and this will lead not only to more investment and all it brings, such as great people, but to new business models.” says Fabricio
Want to talk with fintech-focused corporates, investors and innovators? Join Fabiane, Luis, Eduardo, Flavio, Luis, Victoria and Fabricio at the World Agri-Tech South America summit on June 28-29, in São Paulo.