22 April 2024

Supporting smallholder farmers through technology: an innovative approach from Bangladesh

Each year, the AFI Inclusive Fintech Showcase spotlights digital solutions with the promise to improve access to financial services for low-income populations. In the first in a series of interviews with the 2024 Showcase winners, we spoke to Mohammad Ikhtiar Sobhan, Head of New Business Opportunities at iFarmer, a Bangladeshi firm which has developed a digital platform to increase farmers’ income and support small-scale agriculture.

What challenges is iFarmer trying to solve?

We are trying to solve a couple of interconnected challenges. Firstly, farmers are not part of the formal financing system. Almost 60% of financing in agriculture comes from informal sources, at a high cost. As a result, most farmers do not invest in the right kind of agricultural inputs and technologies.

70-80% of the informal financing comes from the traders who buy the produce from the farmers. Due to the many layers of middlemen, farmers receive a low price for their produce, and the pre-financing they obtained from the traders effectively turns into an interest rate of 40% or above. This hits farmers’ income and profitability hard, to the extent that the younger generation is turning away from farming, and agricultural land is decreasing.

How do you familiarize farmers with your technology?

We currently operate in an assisted model. Instead of asking the farmers to learn to use new technology, we employ local people as our agents, who assist the farmers in using the technology. Whether it’s our proprietary app for loan applications, or sensor-based fertilizer recommendations, this approach helps the farmers to get the benefit, without having to learn something that may seem complicated to them.

We also conduct awareness meetings and events to familiarize the farmers with new technologies. Once we have a critical number of farmers ready to adopt a new technology, we want to let them use it, instead of staying with the assisted model. For example, we observed that 30% of our farmer base is using smartphones, so we have built a farmer app, and are currently running a pilot.

With the app, we are not letting farmers perform critical actions like applying for loans, but rather allowing them to get advisory services, which does not require high knowledge of smartphone usage, and is a great way of to get them started in using iFarmer services directly. Over time, we will allow them to apply for loans, order inputs, and sell their products using the mobile application.

What has been the most challenging aspect of growing iFarmer until now?

Our first big challenge was to win trust. Having the farmers’ trust is critical, and we’ve worked hard over several years to obtain it. Now, it is about scaling those elements to reach more farmers.

The second challenge is that farmers generally don’t use smartphones and aren’t connected to the internet. The agriculture value chain runs on manual processes, still makes payments in cash, uses handwritten receipts, and so on. This makes it very difficult to generate credible and real-time data. We have solved some of these issues, but it’s an ongoing challenge.

What are your ambitions for iFarmer?

There are 20 million farmers in the country, and we want to be their “one-stop solution”. We currently offer access to finance, inputs, advisory, and markets, and want to scale this up to a large number of farmers, while adding new services such as insurance and farm mechanization.

We’re encouraging other providers to plug their services into our network so that farmers can access multiple services under one umbrella. However, we don’t want to stop there. Working directly with farmers will allow us to build the largest supply chain of agricultural produce in the country: we aim to become the “Cargill” for Bangladesh. The bigger we grow, the better we’ll be able to deliver opportunities and prices for farmers. And as we have more interactions and transactions with farmers, we will generate more data, which can be used to develop better services for farmers, not only by us but by government and policymakers.

How do you view the potential of Bangladesh’s agriculture sector?

Bangladesh will have close to 190 million people by 2030 and will need to feed this large population. Smallholder farmers will play a critical role, but we need to create more value and be able to capture that value. We need to look beyond production and local demand. Better integration of technology will ensure improved production efficiency, food processing, and storage.

There is a huge opportunity in complementary, value-added, processed agriculture produce. The growing middle-income population is already demanding higher-quality agricultural produce. We need better storage and processing facilities to meet the increased demand of the growing population. Meeting local demand is our top priority, but we can also contribute to the economy through exporting. We have the opportunity to become like Thailand and Vietnam.

You can learn more about iFarmer on their website.