Farming

AgroFides’ credit scoring tools are unlocking capital for Ghanaian farmers

Prince Boateng is a former US naval officer of Ghanaian origin. He worked in the international development field working with the United States Agency for International Development (USAID) under food security and agricultural development-related programs in Africa.

“It struck me that the countries we were working in had fertile ground yet we were shipping food to them,” Boateng tells AFN.

This motivated him to go into the agricultural field seeing that it was also the backbone of many African economies. Together with his co-founders Acheampong Atta-Boateng and Mike Hickey, he founded AgroFides.

AgroFides is an agrifintech startup leveraging AI and agricultural expertise to assess the creditworthiness of small and medium-scaled farmers in Ghana. It is also an intermediary between lenders and farmers to unlock more capital for them.

Like most African countries, Ghana has a large smallholder farmer population, accounting for around 70% of the five million households involved in agriculture.

Smallholders are often stuck in low productivity cycles given the ‘cash-is-king’ ecosystem they operate in. Lack of sufficient capital and credit access hinders them from affording quality inputs or capital to expand their agribusinesses. In sub-Saharan Africa and Asia, small and medium-sized agriculture businesses face the $106 billion financing gap uncovered in a 2022 ISF report.

Initially, AgroFides ventured into agriculture to find out what tools or inputs the farmers needed to significantly boost their productivity.

“When we looked at what agricultural tools farmers needed to increase their productivity, we always came back to how they could afford these inputs,” Boateng notes.

With this realization, the startup took a fintech-focused route to find ways to help farmers get credit and other financial related services.

Pivoting towards agrifintech

At first the idea was to build a credit scoring platform that would use comprehensive farmer data to build their financial profiles, then sell this platform to microfinance providers to help them offer suitable loans to the farmers.

Despite the perception that financial institutions lack data to determine the creditworthiness of farmers, the team quickly found out that it was not a specific product that these institutions were looking for. The startup reached out to a number of commercial banks in Ghana who instead preferred to give capital to AgroFides to grow the credit scoring platform and bear its responsibilities.

AgroFides, which was first incorporated in 2019, evolved to become a platform focused on offering three separate but related financial services not only for farmers, but for impact focused lenders.

  1. The startup offers impact assessment services to impact investors who have channeled funds into small and medium-sized agriSMEs that are commercially viable. AgroFides aims to be the link between the two where farmers get necessary credit through peer-to-peer lending and these US-based impact investors get returns on loans secured by the farmers through the startup. The service also includes an environmental impact assessment.

“The research that we’ve done has indicated that about 66% of institutions that call themselves impact investors are not able to quantify the impact of their lending, or investments they are doing,” Boateng says, explaining the necessity of the service.

2. AgroFides’ farmer-focused product Fides Score, as its name depicts, assigns a credit score to individual farmers. The tool uses over half a dozen models to analyze variables and agronomic information such as the type of farming involved, location and environmental conditions the farmer operates in, price of the crop, market, planting cycles, yield and revenue from the previous season.

“The uniqueness in our approach is that we look at not just the farmer, but the conditions that the farmer operates in,” Boateng notes. “A farmer can have a higher likelihood of paying back a loan, but if they’re growing crops in a certain region where there won’t be value economically, then their score won’t be high.”

3. The other farmer-targeted service is direct lending. The interest rates range between 15% to 18%, which are lower than the existing prime rate of 20% offered by the central bank, according to Boateng.

This segment is just taking off for AgroFides and it is currently lending to farmers off its books after securing $75,000 in funding in January this year. So far it has disbursed around $80K in cash and in-kind loans to two farmer groups, who are set to complete their particular farming cycles in August and December this year.

Farmer interest

Overall Boateng claims to have the interest of 15,000 farmers and has so far disbursed loans to 200 farmers. Of the 200, the vast majority have been soybean farmers based in Northern Ghana. The smaller group with much higher value loans are vegetable farmers in the same region, who got loans to build solar-powered irrigation systems.

“This was very valuable in the Northern region of Ghana, which has one rainy season in a year. With the irrigation systems, farmers are able to grow three times per year as supposed to once,” Boateng says.

AgroFides has seen another shift in these communities: a rise in employment rates owing to increased productivity, a consequence of more planting cycles in the year.

“The communities that we lend to would typically not have any employment or any jobs, because they’re in a very remote area in Northern Ghana. So typically, it’s a farming community that was just waiting for a rainy season,” Boateng says.

AgroFides has been able to secure a total of $320,000 in funding so far, which consists of a $75,000 angel round and $245,000 in non-equity assistance from Dataiku, an AI and machine learning company providing the startup with data science support for its credit scoring service .

It is now looking to raise $2 million to lend to more Ghanaian farmers, its most active service currently.

The company, with the help of its co-founder Acheampong Atta-Boateng also a bio-scientist, is developing a metric to score farmers on their nitrogen use efficiency. The metric will be instrumental in guiding farmers to optimize inputs used in farming, maximize profits and reduce the environmental impact that conventional farming practices have on the environment.

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