Fostering financial access and market connections for Latin American farmers: The case of ProducePay


ProducePay is a U.S.-based Fintech company created in 2014 that manages and operates a digital platform which provides fruit and vegetable growers in eight Latin American countries with three core services: financing; a digital marketplace; and market intelligence. It is aimed particularly at small- and medium-sized farmers whose produce is bound to be exported to the United States, and which lack access to working capital credit and the market connections required to establish a solid cycle of export-focused agricultural production. Through the digital marketplace, ProducePay connects these producers to both distributors and sellers connected to U.S. markets, assisting them in seizing new business opportunities at transparent commercial conditions. It also protects both buyers and sellers in case one of the two sides does not comply with the agreed transactions. The market intelligence service aims to fill the gap in the availability of standardized, granular and regularly updated produce prices, which makes it harder and makes it harder for financial providers to assess the creditworthiness of agri-producers. Real-time price data is provided through digital market reports on the app, with the data being aggregated from individual farmers and produce buyers on the platform (and integrated by a range of public, private, and proprietary sources).

Published: 23 October 2022
READING TIME: 3 minutes
Author: Niclas Benni

ProducePay offers two types of loans:

1) pre-harvest financing. This credit is for sums ranging from USD 200 000 to 2 million. The farmer can apply for the loan up to 12 months before the start of the harvest, and the loan is usually processed by ProducePay in less than three weeks. Once the producer has shipped its crops to the distributor, the latter sells them and pays ProducePay. The company then keeps a portion of the fund to cover the interest on the loan, and sends the remaining money to the producer;

2) “quick-pay”, a form of factoring by which ProducePay provides producers with an advance on the unpaid receivables (up to 96% of the total amount) that they are owed by their buyers. This type of short-term loan can be approved in less than 24 hours, does not require land collateral, and allows producers to maintain cash flow when they don’t have the time to be paid by their customers.

Recently, ProducePay also offered farmers the opportunity to sell certified carbon credits on international carbon markets, through the platform. The system works as follow: ProducePay assesses the farm’s carbon-reduction practices at ground level, suggesting a series of climate-smart agricultural practices to further reduce the carbon footprint. An external auditing company (Allcot) then confirms the carbon savings generated at farm level, which are then converted into digital credits and can be sold by the farmers. In this way, farmers gain a further stream of income and are encouraged towards adopting climate-smart agricultural practices in their production methods, while distributors and sellers can acquire more sustainable produce and advance eventual institutional goals for what concerns ESG/carbon reduction.

The earning model of ProducePay is based on the three main sources: 1) a small fee collected by the company for each transaction completed on their platform (usually 0.5 to 10% of the transaction, depending on the amount of additional value that Produce Pay can generate for its client); 2) the interest on the loans the company provides to farmers and distributors; and 3) the earnings collected from selling market intelligence data to agribusinesses.

As of 2022, ProducePay has supplied more than USD 3 billion in financing to food and vegetable producers. The company’s digital platform has mediated more than 130 000 transactions, with a network of more than 1500 farms and 700 trading partners. Furthermore, in 2021 ProducePay managed to raise USD 43 million in investment from a series of venture capital funds capital to expand its operations in Latin America. Other investors included the International Finance Corporation and IDB Invest (the multilateral investment arm of the Inter-American Development Bank)

The analysis of a case such as that of ProducePay is quite interesting: the company has adopted a Fintech innovation that is gaining increasing popularity in emerging agriculture (i.e. the digital marketplace) and then demonstrated how it can be used to connect farmers in developing and emerging contexts to vast agricultural import markets such as that of the United States. The added and combined provision of financing and market intelligence services strongly contribute to the overall sustainability and relevance of this model, which appears to show a considerable potential for future growth.