NAB that niche for agtech finance

Australia’s largest bank lender to the farm sector has seized on the emerging opportunities and synergies available to the financial services sector as new technologies and innovations change the face of agriculture. Source: The Australian

National Australia Bank, which lends about one third of all agricultural debt financing in Australia and controls a loan book of $20 billion, believes the large amounts of production and financial data now being collected on farms in real time will change the role of bankers in rural communities forever.

NAB released a report looking at how Australia’s 125,000 farmers are adopting technology and where the gaps and challenges lie for service providers such as bankers in the approaching agtech revolution.

It points out that the banks’ traditional role of offering credit and loans to farmers is coming under increasing pressure, as machinery companies and stock agencies also offer finance to agricultural producers.

They are aided in their lending confidence by access to vital farm financial data and production figures collected electronically from cloud-connected machinery such as harvesters and hi-tech tractors.

On the flip side, the adoption of new agtech tools giving immediate data should also allow banks to be able to grasp a farmer’s real financial and risk position more quickly, and address potential bad loans or take financial action before a situation becomes irretrievable.

In the US, $3.2bn of venture capital was invested in the agtech sector last year, covering everything from soil sensors and yield monitors to new farm managements software, drones, satellite mapping systems, robots, automated machinery, the internet of things and cloud-connected supply chain payment systems.

“The agriculture industry (in Australia) is on the edge of an agtech revolution; these technologies have the potential to dramatically shift the way people and data are connected across agricultural ecosystems, processes and supply chains,” NAB Labs general manager Jonathan Davey said.

“While the development and uptake of these technologies is increasing across both Western and developing nations, the financial services industry is yet to truly harness the value agtech can create for customers. (Meanwhile) other vertically integrated suppliers are playing in this space, potentially taking share from incumbent credit providers.”

The NAB report finds the rate of innovation and technology adoption in Australian agriculture is already unprecedented.

But challenges remain, including poor mobile phone coverage and connectivity in many parts of rural Australia, which prevent farmers from sending data instantly to the cloud to be interpreted into better and quicker decision-making.

The older age of many Australian farmers – with a high proportion older than 65 – is also seen as a potential problem, spurring the need for a greater focus by banks such as NAB on educating and providing capital to younger, more technologically savvy farmers.

NAB agribusiness chief executive Khan Horne said countries like the US, Israel and the Netherlands were leading the way inventing technologies to improve farming efficiency and productivity, with Australian farmers already adapting their businesses to climate change and yield challenges.

“As the major lending bank to the agricultural sector, we have to make sure we are growing and providing agtech solutions around financial data too,” Mr Horne said. “We need real life data to make the best decisions. (This report) is about asking how can we get quicker access to cashflow updates and the balance sheets of our customers, by identifying situations where there might be a problem and being part of the solution in addressing them.”

Mr Horne said that he was not talking about NAB rural bankers becoming agricultural consultants, or significantly changing their role, but being better at helping farmers link together the big picture, perhaps speeding up the adoption of technology with capital assistance.

He said NAB wanted to see the agricultural sector grow and contribute to big debates about how to make it more profitable and sustainable.

“The bank’s role is about responsible lending and risk management but its clients are putting proposals together that involve technology, we have to be well and truly on the front foot as a bank and make sure that when we lend, the security is there and that the (business) is being enhanced in value as a consequence,” Mr Horne said.