The Problem

What is the financial gap that Traive aims to fill? What is the importance of agricultural finance in general, and financing small & medium farmers (SMFs) specifically?

Globally, total commercial credit to agriculture is lower than the contribution of agriculture to GDP. According to FAO, in 2018, “the agriculture sector in nearly half of the countries received less than 3.5 % of total credit.

Besides the unmet credit capacity of the agricultural sector in general, the existing credit is not dispersed among farmers evenly. There are millions of small & medium farmers (SMFs) whose financial needs are too big to rely only on microfinance, & too small for traditional lenders (the so-called Missing Middle Farmers)

Is there a universally agreed definition for SMFs or the Missing Middle Farmers?

No, there is no universal one-size-fits-all answer. The right definition is always dependant on the specific purpose that it addresses, and it always comes with a tradeoff between completeness and feasibility. Nonetheless, usually one or a combination of these factors are taken into account: 1) access to factors of production 2) the type of management 3) market orientation 4) the economic size of the holding

The definitions may also take a quantitative, qualitative or hybrid approach. Traive uses a hybrid approach and takes into account a combination of factors. Reaching a definition that is as accurate and feasible as possible is a challenging, but imperative milestone. While we are committed to achieve this goal, our North Star in this journey is the fact that neither microfinance nor traditional finance meets the needs of our targeted segment fully. We refer to them as the Missing Middle and SMFs interchangeably.

What is the reason behind this financial exclusion?

Financial exclusion of the SMFs is a complex issue that is both the reason for, and the result of many socio-economic problems. However, the inability of lenders to risk assess farmers properly and cost-efficiently is one of the main reasons lenders either do not enter this market, or if they do, provide loans with very high interest rates.

This is why Traive harnesses the power of high-tech, data-science and our novel algorithm to generate a live risk assessment for each farmer, at considerably lower costs and with higher accuracy for lenders. Providing both lenders & farmers with reliable and timely warning alerts, accompanied by embedded intelligent insurance, further enable them to mitigate their risks. These are key to opening the market to more lenders, and they are all at the heart of Traive’s solutions

Why is financial inclusion of SMFs so important?

Financial exclusion of the SMFs is a complex issue that is both the reason for, and the result of many socio-economic problems. In the next question (More Information About SMFs) you may read briefly about some of these issues. It is important to note that while such problems cannot be explained or solved solely by financial issues, finance plays a critical role in all of them.

This is why financial inclusion “is positioned prominently as an enabler of other developmental goals in the 2030 Sustainable Development Goals, where it is featured as a target in eight of the seventeen goals”. Here are a few more resources if you are interested to read more about this topic: Achieving the Sustainable Development Goals: The Role of Financial Inclusion

Pathways To A Better Life: The Intricate Role of Digital Finance in Reaching the Sustainable Development Goals

More Information About SMFs

Affecting Climate Change

Agriculture, forestry and land use change are responsible for 25% of greenhouse gas emissions. At the same time, according to FAO, while “Agriculture emits around one quarter of greenhouse gases, it [also] holds almost half of the solutions to global climate goals.” SMFs, as the largest group of farmers in the world, can play a critical role in increasing or decreasing the effects of climate change. While under the pressure of poverty, they often resort to short-termism, which leads to massive deforestation, desertification, and degradation of land

Affected by Climate Change

Agriculture is hit hard, taking about a quarter of all damage and losses caused by natural hazards and disasters in developing countries.” And given that SMFs rely heavily on weather conditions, they are the most affected by climate change.

Needless to say, such climatic risks decrease both farmer’s financial resilience and lenders appetite to enter the market.

Down Arrow

Vital to Our Food Security

Projected world population in 2050 is 9 billion, and agricultural production must increase
50-70% by then “sustainably”. The vast majority of the world’s farms are very small in size, and although a majority of the global production comes from the very small percentage of large farms, smallholders produce about 80% of the food supply in many countries, especially in Asia and Sub-saharan Africa. Also, some studies estimate that “smallholders globally produce 28–31% of total crop production and 30–34% of food supply on 24% of gross agricultural area.”

Massive Out-Migration

Financial distress is one of the main reasons behind outmigration of SMFs. By 2050, we are expecting a massive urban sprawl with another two and half billion people living in the cities across the world. According to FAO “Urbanization is foreseen to continue at an accelerating pace with urban areas to account for 70 percent of world population in 2050 (up from 49 percent at present [2009]).” (UN projection in 2014 was 66%, up from 54% at the time, and then 68% in 2018 up from 55% at the time).

Our Impact

What are Sustainable Development Goals(SDG)

  • Traive offers financial inclusion and data analytics solutions that aim to decrease the gap in the financial sector for the small and medium farmers. While financial inclusion is not a direct goal among the 17 Sustainable Development Goals (SDGs), it is an important enabler for all of them, specifically for 8 SDGs that we explain below.
  • The SDGs were set in 2015 by the United Nations General Assembly, to be achieved by the year 2030. They include 17 goals in order to achieve a “better and more sustainable future for all.” They are interdependent, and progress or failure in anyone, affects the others.
  • To learn more, please click on each SDG in which you are interested. For more resources on this topic, see UN Sustainable Development Goals