FINCA Ventures: Impact Investing in the Agricultural Sector

Smallholder farmers across Africa face numerous challenges, including limited access to affordable and quality inputs that result in suboptimal crop yields, limited access to offtake markets, among others. Additionally, less than 10 percent of land in Africa is formally registered in a way that provides legal protection to landowners. Procedures to register and document land rights are complex, time consuming (can take as long as two years), and costly – especially for smallholder farmers who have limited disposable income and competing expense priorities. Without clarity on land boundaries, or access to formalized land titles, smallholder farmers are left insecure and have less incentive to invest in improving their land productivity because they are more vulnerable to land disputes and evictions. This sense of insecurity makes individuals unable to plan for the future, generate more income, and access finance, perpetuating the cycle of poverty.

As a result, FINCA Ventures chose to invest in Meridia, a company that combines GIS technology, ground operations, and land documentation workflow software to lower the costs of land mapping and formalization for smallholder farmers at scale across Ghana, Cote d’Ivoire, Malawi, and Indonesia.

Meridia co-founders Simon Ulvund and Thomas Vaassen designed a comprehensive service that includes building trust with the traditional customary leaders in each country they operate in, working to sensitize the community and educate them on land rights, to offer a full-service model that handles all the logistics of obtaining land documentation to provide ease to their clients. In comparison to other methods used by governments, licensed surveyors, and value chain actors, such as time-consuming paper-based methods or costly hardware and software solutions that lack data integration, Meridia has been able to reduce the costs of land documentation for smallholder farmers by 50-80% percent.

Meridia partners with large commodity buyers that are increasingly concerned with the sustainability of their supply chains across cocoa and palm oil, with future opportunity in tea, coffee, and sugar cane. Mapping helps these larger organizations be more effective in implementing interventions and technical assistance; helping to better provision access to inputs, extension services and markets, which can lead to more predictable and quality supply, better traceability for certification bodies, and ultimately higher and more accurate premiums for farmers. This is especially important for many tree crops, as rehabilitation and replanting programs are vital for success and are not easily implemented without providing incentives to farmers.

Meridia also enables these organizations to secure affordable land tenure documentation for their farmers using the data collected, either subsidizing or completely covering the cost of land registration for their farmers, recognizing that this service creates the most value for the farmer and allows the organization to build loyalty with its supplier base.

Additionally, smallholder farmers need financial services to help them smooth out their cashflow cycles, invest in their farms, save for the future, and better support their families. Yet, these farmers have largely been unserved by banks and MFIs, like FINCA Impact Finance, and live and operate outside of the conventional financial sector. A farmer’s ability to access financial services is hampered by a variety of variables, including seasonal income sources that don’t match up with standard payment schedules and aren’t properly documented, as well as a lack of collateral. Land tenure as a form of collateral has been largely unobtainable to date because it has been cost prohibitive.

This is where Meridia comes in — even when use as collateral is not possible, such as with leaseholds, Meridia’s land document data can provide financial institutions with confidence on land size (which generates about 90 percent of smallholder farmer income), location, and social acceptance of land boundaries, which has proven to be sufficient for many rural banks to provide loans on a cashflow basis. Meridia also offers access to robust farmer profile information through partnerships with commodity buyers, which farmers can provide to a local banking institution to help establish creditworthiness and reduce risk.

Leveraging a strong combination of tech and touch, Meridia is transforming the way that land mapping and titling gets done across sub-Saharan Africa.