The Role of Big Data in Agricultural Lending

Since the days when farmers kept weather journals, agriculture has used data to optimize their operations. They’d use historical, self-tracked logs to predict weather patterns and monitor crop health. Today, data is still used on the farm to make decisions, but how farmers are maximizing their data looks a whole lot different. The rise of precision agriculture, monitoring technology, and the software to compute data has led to the agricultural data revolution. Big data is transforming agriculture,  including agriculture lending. Big data is opening up paths for alternative agriculture lenders. 

Big Data in Agriculture 

Big data in agriculture refers to the combined data of many farmers collected from their precision farming management tools, like GPS guidance, control systems, sensors, robotics, drones, autonomous vehicles, variable rate technology, GPS-based soil sampling, automated hardware, telematics, and software. Analyzing big data in agriculture aims to gain insights and make data-driven decisions that can benefit farmers and agribusinesses. 

Big data has the potential to transform agricultural lending. Here are a few benefits of big data in agricultural lending.

Improved Risk Assessment

One of the challenges in agricultural lending is accurately assessing the risk associated with each loan. Traditional risk assessment methods rely on historical financial and production data, such as crop yields and credit history. However, big data can provide more accurate and real-time information on various factors influencing a farmer's ability to repay a loan - including weather patterns, market prices, and crop health. By incorporating big data into risk assessment models, lenders can make more informed decisions about the creditworthiness of borrowers and reduce the likelihood of loan defaults.

Enhanced Loan Monitoring

Big data can also be used to monitor loans more effectively. For example, lenders can use satellite imagery and remote sensing data to monitor crop health and identify potential issues like pest infestations or droughts. This information can help lenders proactively address problems and support borrowers in taking corrective actions, reducing the risk of default. Additionally, lenders can use data analytics to track market trends and commodity prices, allowing them to understand borrowers' financial performance better compared to other farmers and adjust loan terms accordingly.

Personalized Loan Products

Big data enables lenders to create more personalized loan products tailored to the unique needs of each farmer. By analyzing data on farm operations, crop yields, and market trends, lenders can develop loan products that better align with the borrower's financial goals and risk profile. This personalized approach can lead to more successful loan outcomes and increased borrower satisfaction.

Streamlined Loan Application Process

Big data can help streamline the loan application process for farmers. By leveraging data from various sources, such as government records, credit bureaus, and farm management software, lenders can quickly and accurately assess a borrower's financial position without requiring a lengthy application process –  saving both time and resources for both lenders and borrowers. 

Increased Access to Credit for Beginning Farmers 

Big data can icrease access to credit for beginning farmers. In the US, small and medium-sized farms struggle to access enough credit due to traditional lenders' unwillingness to lend to production agriculture. These family-owned farms, often first-generation, are deemed “too risky” and are essentially underbanked. These farmers are stuck in a cycle of trying to cash-flow their business in an industry where the barriers to entry are entirely financial. 

The Future of Ag Lending - Alternative Agriculture Lenders 

At Bankbarn, we are committed to better financing for farmers. We start our process with data-driven decisions, that relies on the power of big data. Our AI-powered credit risk models will quickly and accurately measure a farmer’s risk and prescribe a customized rate, term sheet, and debt capacity, enabling a smarter, faster loan origination. That means farmers can get back to doing what they do best – farming. And farming with the financing they need to grow their dreams.

Interested in learning more about how data is revolutionizing ag? Check out this article on the The Role of Big Data in Agriculture.