Asia in 2020: Faster and better financing

The coronavirus pandemic made it even harder for smallholder farmers to find financing and markets for their products in 2020. So last year, we made an extra effort to facilitate new technologies that help farmers increase their yields and opportunities for financing, for example by giving them access to weather forecasts and crop advisory. Or by increasing their chance of qualifying for a loan, by engaging with an ag(fin)tech that uses an innovative model for credit scoring for smallholder farmers. Through simple yet powerful innovations, we help farmers make informed decisions and mitigate risks. In Indonesia, we partnered with a peer-to-peer platform to understand the dynamic between fintech and smallholder farmers.

In 2020, we invested heavily in ‘blended finance’: the combination of philanthropic funds and commercial lenders. Blended finance is a stimulant for traditional banks and non-banking financial institutions to finance smallholder farmers, because they share the risk of the loan with other parties.

In India, especially, we have begun collaborating with other foundations such as the IKEA Foundation, Shell Foundation and the Ford Foundation. By combining the capital of several different parties, we can reach even more farmers. The efforts in India inspired our team in Indonesia to also harness the power of multi-stakeholder partnerships. Together with USAID Green Investment Asia and South Pole, we conducted joint studies in carbon footprint accounting. We also work with experts from ICRAF and Danone Indonesia to help rice farmers in East Java adopt climate smart agriculture practices and transition to a lower carbon footprint rice cultivation method.

In 2020, more farmers in Asia freed themselves from unreliable intermediaries. With solid financing, they gained access to the agricultural resources and knowledge they need to improve their harvests, both in quantity and in quality. That in turn resulted in improved access to sales markets, and a stronger position in the market.

By financing more financial institutions outside of the official circuit, we have been able to help more farmers year after year. For example, in India we have guaranteed financing for nbfc Samnunnati Financial for two years, and they now assist 116 farmers’ cooperatives with a combined 90,000 members.

Together with our partners, we are increasingly financing projects in Asia that contribute to climate smart agriculture. Farmers who participate in these projects learn skills like how to produce less carbon dioxide. Or how to use organic pesticides instead of chemicals to protect the ecosystem.

Succession is a problem many farmers face, even in Asia. Many young people would rather move to the city for work than take over a family farm. In Indonesia, for example, the average farmer is over 40 years old. We are now working to finance more programs that make young people excited about learning more about farming.

We are also financing more ag(fin)tech startups. They are coming up with simple solutions for the entire loan cycle, such as tools for credit scoring and monitoring harvests using satellite technology. This gives financial institutions more control over the loan process, which encourages them to offer loans to smallholder farmers.