Innovative Credit Scoring Solutions for Easy Access of Loans to Farmers

By Melisa Mong'ina

Artificial intelligence has made a significant impact across various industries since its inception. As it continues to evolve, Pathways in collaboration with GIZ, Fortune Sacco, and Kenya Agricultural Livestock Research Organization (KARLO), has developed a solution that would enable farmers to acquire loans easily and faster.

Speaking in Nairobi during the Launch of Credit Scoring Solutions for Farmers, Joel Onditi, CEO of Pathways Technology explained how they are leveraging emerging technologies such as data analytics and AI to create solutions that can tackle real-world problems for farmers.

Joel Onditi, CEO of Pathways Technology during the panel discussion 

“Pathways focuses on leveraging emerging technologies such as data analytics and AI to build solutions that are solving real-world problems in Africa today. We are specifically launching a solution that is for farmers alone,” said Onditi.

This solution aims to provide credit scoring for farmers who often struggle to acquire loans because they tend to be seen as risky borrowers. The system will enable Saccos and other lenders to offer loans to farmers confidently.

“Currently farmers have difficulty obtaining loans because all the lenders view them as high-risk. We are looking at collecting data and using AI to build a credit score that can help farmers secure loans confidently,” he added.

Onditi noted that they have partnered with KARLO and GIZ for this project. Their piloting was conducted at Fortune Sacco, a farmer-based cooperative in Kerugoya, Kirinyaga County which has over 100,000 members. The program received funding from GIZ to ensure a smooth process.

“We've collaborated with KARLO and GIZ for this program. The piloting took place at Fortune Sacco in Kerugoya town which has over 100,000 members, and are eager to lend to their farmers,” said Onditi.

Initially, Fortune Sacco managed to extend loans to only 20% of its 100,000 members due to a lack of data. With the help of Pathways’ solution, the Sacco was able to provide loans to all of its farmers.

“Fortune Sacco used to lend to just 20% of its farmers because they lacked adequate data. With our program, the sacco can now lend to all its farmers because we are providing them with the right data to lend to these farmers,” he said.

Timothy Muthike, Deputy CEO and Head of Finance at Fortune Sacco, reported that they have about 132 active members, 55-60% of whom are engaged in coffee, tea, rice, horticulture, and dairy farmers. Their asset base is approximately 8 billion, and they have successfully disbursed loans amounting to 6.7 billion.

“Out of the 132 active members, over 55-60% are mainly involved in coffee, tea, rice, horticulture, and dairy farmers. Our asset base is roughly 8 billion, and we have been able to disburse loans amounting to 6.7 billion,” stated Muthike.

In terms of lending, accessing young farmers, small-scale farmers, those engaged in unstructured farming, and the absence of specific regulations governing agricultural products posed a challenge to them.

“Our key challenge in terms of lending is access to youths, small-scale farmers, and also farmers doing unstructured farming. Furthermore, there is no specific law that governs products or crops such as bananas or French beans,” he shared.

Fortune Sacco is focusing on lending tea and coffee as they are well organized and governed by specific acts.

“Our key lending activities concentrate on tea and coffee. They are very well organized within a primary coffee cooperative society, and there is a coffee act that regulates their handling," he explained.

Muthike added that they are working with Pathways to reduce unnecessary bureaucracies and human biases associated with lending. They also plan to engage with the government to gather data on microeconomic factors affecting various regions, with the aim of benefiting small-scale farmers.

“We aim to eliminate unnecessary bureaucracies linked to lending and human bias by partnering with Pathways Technology. We will be approaching the government to collect data, particularly on microeconomic factors affecting several regions, and we hope that 50-60% of the small-scale farmers will gain timely access to credit,” Muthike concluded.