Farm and Production Mapping
App for loan support monitoring (Kenya)
To de-risk agricultural loans, WOCCU tested new digital tools for credit union lenders to monitor the crop production of borrowers’ farms.
In Kenya, WOCCU and KUSCCO tested CropIn Technology Solutions’ “SmartFarm”, a web and Android application-based system for farm mapping and production monitoring. This system was designed to help credit unions to de-risk loans by enabling monitoring to support farmer’s access to loans. The application provides for a remote monitoring solution, including the capability to manage farms through standard production practices and activity logging; maintain logs of all alerts and management guides on pest and disease infestation; and includes functions for traceability and output predictability. When a farmer is selected for a loan, their farm is registered in this application by the KUSCCO officer.
Once a farm is added onto the system, SACCO staff could monitor production progress from their offices without the need to have routine field visits. Physical visits were to only made when necessary because the system alerts credit officers when plants are performing poorly. The system also logs farm management activities and alerts users of when activities are due. SmartFarm monitors farms using satellite images.
WHAT WE LEARNED
During the testing process with two Kenyan SACCOs, the costs involved to train and validate the models, limited technical knowledge of agricultural lending requirements, and local agricultural practices, this system was ultimately determined to be inadequate for SACCO needs.
(1) Entering the required inputs and training the forecasting algorithms was time-consuming and intensive.
While routine physical visits to individual farms during the cultivation process were kept to a minimum, SACCO staff had to conduct physical visits to the individual farms to collect farmer information, their planned production inputs, enter GPS coordinates of the farm, and walk around the farm to measure the farm size.
These up-front costs inhibited SACCOs from bringing on board small farms, where the high costs were often higher than the SACCO interest income that would be gained from the loans.
(2) Local agriculture practices also complicated the adoption of the system.
- Farms under 2 acres proved difficult to accurately image and monitor by the satellites due to their size and ultimately unable to be included in the system. In a country where the middle-size farm is 1.2 hectares (roughly 3 acres) and smallholder farmers only farming .47 hectares (about 1.15 acres), this meant the application of the solution was extremely limited
- The common practice of intercropping (the practice of cultivating multiple types of crops in a given plot) among smallholder farmers affects crop imaging for systems training and monitoring of crop canopies using satellites and resulted in inadequately trained algorithms and erroneous data points that inaccurately informed the crop yield forecasting.
(3) Training opportunities should have been offered to SACCO staff on complementary technical aspects of agricultural lending.
- Unfortunately, while the platform showed promise, there was not enough support provided to build a foundation in agricultural topics such as crop nutrition, crop protection, and production planning.
- As the algorithms continued to be trained and validated internally, additional training should have been provided to the SACCO staff. Without this foundation, system set-up was problematic as well as the continued monitoring of the farm through the system.
Digitized lending has the ability to enable credit unions to improve their lending practices, increase loan volume, decrease lending risks, and provide a wealth of benefits to credit union members. As credit unions continue to digitize their operations, digitizing their lending operations should be a priority pillar of their transformation and be constantly reviewed as part of their digital transformation strategy. WOCCU looks to continue our engagement with our members as they consider the possibilities of digitizing existing lending practices or developing new practices as part of their transformation strategy. As part of our engagement, we look to you, our partners, to share your experiences and we encourage you to reach out to our project team and let us know your thoughts. To spur the conversation, we have included some framing questions below. We would love to hear your feedback and thoughts on the questions below and beyond!
- What has been your experience using digital lending?
- What are some challenges you have experienced?
- What are some opportunities for digital lending in your country?
- What are you excited about?
- Based on your experience, what will credit unions need to do to ensure readiness to develop new practices around digital lending?
- Do you currently offer any digital loan products? If so, what has been your experience developing the product and testing with your credit union members?