Jérôme van Innis | Transforming Africa’s agri-sector through innovative financing

Jérôme van Innis is the co-founder, Pumpkn.io. Source: Supplied.

Lack of access

Yet, despite its immense potential, businesses along the agri-value chain face significant hurdles – the most critical being a lack of access to financing and the tools to navigate growth. This financing gap cripples agribusinesses, hindering their ability to innovate and ultimately, hindering the continent's economic development.

While Africa serves as a key supplier of food products to major players like the EU and US, with South Africa alone boasting record agricultural exports in 2023, its true potential remains unfulfilled. The picture brightens when we consider the rise of intra-African trade in processed products, which surged by a staggering 46.3% between 2019 and 2021. This trend, further fuelled by the African Continental Free Trade Agreement (AfCTFA), promises exciting possibilities for African agriculture. The African Union has just announced their ambitions for the AfCTFA to become the largest free trade area since the formation of the World Trade Organisation given the continent’s 1.2 billion strong population. However, for these aspirations to materialise, we must address the financial roadblocks constraining agri-SMEs.

The traditional financial landscape often perceives agri-SMEs as high-risk borrowers. Price fluctuations, unpredictable weather patterns, and limited access to formal documentation all contribute to this perception. Rural locations further exacerbate the issue, making it expensive and logistically challenging for lenders to reach these businesses. The burden falls on those who lack formal credit history or traditional collateral like land. For example, South Africa’s ag-debt market of ~R210bn serves primarily the top 2% of farms.

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So, how do we bridge this gap? The answer lies in fostering close partnerships with agri-SMEs and adopting innovative financial solutions. "The need of the hour," as I see it, is to move beyond a transactional approach and build robust partnerships. This means providing financial support, repeatedly, to enable sustainable growth.

The world's digital revolution presents a powerful opportunity. Fintech companies like Pumpkn are leading the charge with technology-led solutions, like frictionless data-driven credit assessments. This approach goes beyond traditional metrics, utilising multiple data sources to identify creditworthy borrowers who are otherwise overlooked. Paperless applications further streamline the process, making it easier for SMEs to access the resources they need.

Fostering trust

But our work doesn't stop there. Tailored lending products are crucial. Access to working capital, invoice financing, or equipment financing empowers these businesses to expand, improve operations, and overcome financial hurdles. We need to shift our perspective and view African SMEs through a unique lens, focusing on partnership-based lending to build strong and growing enterprises. This fosters trust and ensures the success of the invested capital.

The impact of a technology-driven approach is undeniable. Fintech is revolutionising agri-financing, empowering African farmers and food entrepreneurs. While significant progress has been made, there's room for further advancement. Development agencies, the public sector, and traditional lenders need to collaborate with teams that understand the intricacies of these businesses and assess their risk profiles effectively. Partnering with fintechs can bridge the gap and ensure SMEs get the capital they need to not just survive, but thrive. Consider this: one-third of Africa's GDP rests on the shoulders of this industry. Empowering it empowers the continent.

This isn't just about financial security. By fuelling growth, we create jobs and improve livelihoods. The success we've witnessed at Pumpkn is a testament to the transformative power of technology and innovative partnerships in bridging the financing gap. As more fintech companies enter the market and governments prioritise policies that support agri-financing, the future of African agriculture shines brighter than ever.

Together, stakeholders can establish a more inclusive financial system that unlocks the potential of African agri-SMEs, fuelling the continent's economic engine and propelling it towards a food-secure future. It's time to empower Africa's food heroes, and a partnership-based approach, leveraging technology and data-driven solutions, is a vital step in the right direction. Let's embrace this future, one loan, one partnership, and one thriving business at a time.