A fintech startup uses data to provide more affordable credit to underbanked small farmers
Spotted: Brazil’s agriculture industry is huge – providing almost one in ten of the country’s jobs. But despite the importance of agriculture to the economy, many farmers are poorly served by the financial system. To obtain the inputs they need for their business, small farmers must often rely on credit provided by retailers of fertiliser, machinery, and seeds. And credit from these sources is often expensive and short term.
Agricultural fintech startup TerraMagna aims to reduce farmers’ liquidity woes by making credit more affordable. It does this, not by cutting out agricultural retailers—who often have long-term relationships with the farmer—but by giving them more confidence to lend to their customers. The startup uses a wide range of data sources, such as satellite imagery and climate data, to assess a farmer’s creditworthiness. Crucially, the company provides point of sales (POS) systems to retailers, enabling them to analyse the financials of both the retailer and the customer. This further refines the credit analysis, helping to overcome risk aversion – a key impediment to affordable rural lending.
TerraMagna’s technology also makes it possible to integrate compliance with environmental regulations into credit analysis – an important consideration in a country that is home to two-thirds of the Amazon rainforest. “If you’re contributing to deforestation, you’re probably going to have a hard time selling your soybeans,” explains TerraMagna’s CEO and co-founder Bernardo Fabiani.
The future looks bright for TerraMagna, with the startup having recently secured $40 million (around €35 million) in funding from Japan’s SoftBank.
Written by: Matthew Hempstead