Supply chain financing in agriculture

The main themes and methods of supply chain finance (SCF) and the implications in agriculture are discussed in this paper. Current research attempts to highlight solutions for the implementation of SCF in agricultural supply chains, what is sustainable SCF and its importance in agriculture sector. ESG Analytics play an important role in financing of supply chains. One of the more recent innovations is the development of a so-called supply chain “digital twin”. The twin is a replica of the real-life model which enables users to measure the likely impact of change on key performance indicators (KPIs) and simulating outcomes to refine forecasts and optimize planning and design. Agro-food value chains are characterized by substantial financial risks. Agro firms' profitability is adversely affected by systemic risks. Firms that have implemented contingency plans to mitigate avoidable risks are more likely to repay their loans. There are several Fintech service providers who can produce a report card of a corporate that is following the UN Sustainability Development Goals (SDG's). The banks do make use of these reports to further hand out incentives for those agricultural producers who follow the SDGs, thereby making financing and working capital management easier for such followers of ESG standards. Finally, the authors introduce the concept of Deep Tier Supply Chain Finance (DTSCF), extending from a traditional Payables Finance structure beyond Tier 1 suppliers so that available finance can be channelled deeper into the chain. This type of financing still leverages the credit profile of the anchor buyer, but additionally supports the distribution of finance into the lower tiers of the chain, thereby addressing the risk of non-performance or fraud, particularly in the form of duplicate invoices. These facilities also serve to reduce operational costs and eliminate the risk of error. There are many small and micro-sized enterprises, as well as farmers, who are engaged in the agricultural value chain. Many of these individual stakeholders lack adequate access to funding. SCF creates opportunities for banks to deliver innovative financial products and services whilst leveraging the power of emerging technologies, like artificial intelligence and advanced data analytics.