One of the major impediments to agricultural lending is the high cost of evaluating borrower creditworthiness. The specific nature and diversity of agriculture requires sophisticated agronomic know-how. However, it is expensive to use “expert” loan officers to collect and evaluate borrowers and anticipate cash flows. As a result, many agricultural micro, small and medium enterprises (MSMEs) and households remain without access to finance.
However, the increasing demand for agricultural commodities, as well as rising competition in the urban areas, has led financial institutions (FIs) to look again at this sector. They demand innovative approaches to implement agricultural loan products with risk evaluation systems that calculate cash flows and thus reduce costs.
In response to these challenges, IAS has developed an innovative scoring tool called ALES.