Future of agri-tech in Bangladesh

Asian countries have traditionally placed significant reliance on agriculture, which not only provides livelihoods for millions but also contributes significantly to GDP (gross domestic product) growth. Nevertheless, the agricultural sector still grapples with a multitude of challenges, including limited access to formal credit, unfair market pricing, outdated farming techniques, and inefficient supply systems. In response to these issues, agri-fintechs have emerged as a transformative force, harnessing technology to enhance agriculture's potential. Although relatively new in Asia, this sector has rapidly evolved in recent years and is poised for even greater growth.

Smallholder farmers are vital contributors to Asian economies. It is estimated that approximately 16 million smallholder farmers contribute to the agricultural landscape in Bangladesh. However, their primary impediment lies in their lack of access to formal financing, hindering their capacity to expand production and adopt modern agricultural practices. Fortunately, with the introduction of fintech and other technology, the agriculture sector has ushered in newfound opportunities, enabling previously disadvantaged farmers to benefit financially.

Financial instruments have traditionally excluded agricultural communities, even though the ‘barga system’ (crop sharing) has existed for thousands of years along the Bengal delta. In recent times, agri-tech startups such as iFarmer and WeGro have enabled city-dwelling, tech-savvy, financially independent individuals to invest in farms and their agricultural projects. Their mobile applications allow investors to purchase units or shares of a project, track progress, and collect returns easily after harvest. Farmers' benefits are manifold; they are able to receive finances with minimal paperwork and can pay off their debts as a one-time payment at the end of the project. Farmers are also equipped with training, insurance, veterinary services, and buy-back facilities with technology embedded within the various processes.

In the remote char areas, development organisations such as Swisscontact are partnering with such startups to solve problems for farming communities facing unique geographical challenges such as water logging and soil salinity.

Fintech startups provide financing for agricultural machinery as well. Farmers rely on machinery to increase efficiency and reduce costs associated with land preparation, irrigation, pesticide and fertiliser application, etc. But machines are not accessible or affordable for smallholder farmers; they have to rent the machines from local service providers (LSPs), who are essentially more affluent farmers with more resources and capital. Fintech startups raise capital from various financiers, and purchase machinery for LSPs to utilise for their own projects, and rent out to various smallholder farmer communities.

On the other end, startups such as Agroshift and Fashol, have minimised the supply chain between farmers and retail consumers, eliminating middlemen and ensuring fair prices for the former. Agroshift has set up unique storefronts for garment workers at their workplace, while Fashol brings fresh produce from farmers directly to urban retail outlets. By leveraging their logistics and storage networks, farmers can focus on their yields instead of sales, and less is lost due to waste.

Among other notable innovations, iPage leverages IoT, intelligent sensors, devices, and other more complex technologies to enable decision-making for farming communities. Dr Chashi employs machine learning for farmers to point their smartphone cameras and identify critical diseases plaguing their crops and plants. This will soon allow government and development organisations to map, track, and limit the spread of diseases across the country.

InsureCow and Adorsho Pranisheba optimise the process of insurance and cattle management specifically for livestock farmers. InsureCow has introduced a livestock muzzle technology to identify and tag insured animals with veteran providers such as Phoenix Insurance underwriting the assets and WeGro connecting farmers to such technology. Green Delta Insurance has introduced various insurance products for farmers and has partnered with various startups in order to protect the assets of farmers. But most farmers across the country are still quite oblivious and apprehensive about these products and services, and have yet to adopt these practices. Weather and yield-based insurance for crops can further safeguard farmers from calamities and diseases. Agricultural insurance, when done right, can truly protect farmers and their investments and motivate their work.

Financial institutions are extending their partnerships with tech startups as well, further enriching their capabilities and alleviating the lives of more farmers. Banks such as Prime Bank Limited, Mutual Trust Bank Limited, United Commercial Bank PLC, and Dhaka Bank Limited are working towards conducting KYC (know your customers) and disbursing more loans for farmers through digital channels.

Challenges still remain; importing key commodities is more expensive than ever, distribution channels and supply chains are plagued by corrupt practices and other systemic inefficiencies. Climate change and unprecedented natural calamities threaten our food production capabilities and potential. According to LightCastle Partners, lack of access to finance from traditional financial institutions in the agriculture machinery market and the agricultural sector in general also leads to many farmers borrowing from informal money lenders or loan sharks, who typically provide faster disbursement but at a much higher cost of funds.

Even as the country moves towards a smarter future, millions of farmers remain unbanked and untouched by the winds of change. More investment and research need to be directed towards developing crops and livestock with better yields, resilience, and lower environmental impact. More and more financial institutions need to view agriculture as a viable space for investment, both for profits and social impact. Consolidated efforts among the government, development organisations, and other institutions are necessary for collecting and analysing data and helping the agricultural community make more informed decisions. Until then, there is a drastic dearth of analysis, forecasting, and early intervention systems that would safeguard farmers and their harvests.

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