In the past decade or so, high-resolution satellite data has been made readily available for commercial and private use. Using this data, experts can monitor changes in our environment, infrastructure, and ecosystems which gives profound insights into the economic and demographic state of the planet. Affordable advanced tools have made it easy to use predictive analysis together with machine learning and AI to leverage data for better business decisions. It helps farmers interpret satellite images of their fields in record time and implement the necessary processes to achieve good crop yields.
This data from satellites is not only helpful to farmers. Financial institutions can also use this data to access the performance of crops and assess the value of fields remotely. It would help them assess risks to be able to give loans to small farmers.
Assessing risks accurately is one of the biggest challenges banks face when loaning to smallholding farmers. They need to know if the agribusiness or small farm owner will be able to repay the loan. So, the banks need to review all the necessary documents and understand the farmland’s yielding ability.
To verify and check information on documents provided by farmers, banks need to send field agents physically to the farms. This process can be resource-intensive in terms of time and labour. However, with satellite images and other remote sensing technologies, this task can be done remotely. Using crop monitoring platforms, financial institutions have easy access to historical farm data, vegetation indices, farm productivity, etc. It will give them the confidence to work with the farmers. It is a win-win situation, reducing costs at both ends.
What issues do banks face in working with data?
Some of the main challenges that banks have to go through can be broken down into:
Alternative credit scoring - people with low income living in rural areas typically do not have good credit, making it difficult for banks to assess their worth and provide them with loans. However, that problem can be fixed simply with satellite images. They provide banks with historical data on farmlands, which can be used by banks to assess the worth of the farmer.
Lack of transparency - some clients are capable of providing fake or false documents of their profit and yields just to get loans from banks.
Not enough data to make a proper assessment - Banks can’t only review documents to assess the worth of small farm owners. They need to send scouts to check out the farms, which can be time-consuming, costly, and labour-intensive.
Need for modern technologies for risk analysis - conventional means of risk assessment need to be replaced with digital ways to keep up with constant changes in the financial industry.
Revenue forecasting - Food insecurity is common in lots of developing countries that are largely dependent on rainfall farming for food. Climate change has put them more at risk with the constant threat of droughts and floods, which often lead to decreased crop yields. However, using remote sensing, experts can get accurate estimates of crop yields, which will buy governments time to react and address food shortages. These estimates can also be used by banks to know if farms will be yielding enough to pay back loans.
As banks continue to integrate satellite and remote sensing technologies into their workflow, owners of small farming businesses will have the possibility to get financial aid. It will give banks the confidence to work with this demographic.
With the ongoing spat between the United States and China, which seems to be only getting uglier, Katina Hristova explores the history of trade wars and the lessons that they teach us.
Trade wars date back to, well, the beginning or international trade. From British King William of Orange putting steep tariffs on French wine in 1689 to encourage the British to drink their own alcohol, through to the Boston Tea Party protest when the Sons of Liberty organisation protested the Tea Act of May 10 1773, which allowed the British East India company to sell tea from China in American colonies without paying any taxes – 17th and 18th century saw their fair share of trade related arguments on an international level.
Boston Tea Party/Credit:Wikimedia Commons
Trade wars were by no means rare in the late 19th century. One of the most infamous examples of a trade conflict that closely relates to Donald Trump’s sense of self-defeating protectionism is the Smoot-Hawley Tariff Act (formally United States Tariff Act of 1930) which raised the US already high tariffs and along with similar measures around the globe helped torpedo world trade and, as economists argue, exacerbated the Great Depression. As a response to US’ protectionism, nations across the globe began striking each other with an-eye-for-an-eye tariffs – countries in Europe put taxes on American goods, which, understandably, slowed trade between the US and Europe. As we all know, the Depression had an impact on virtually every country in the world – resulting in drastic declines in output, widespread unemployment and acute deflation. Even though most countries began to recover between 1932 and 1933, the world was hit by World War II shortly after that. In 1947, once the war was over, the World Trade Organisation (WTO) was established - in an attempt to regulate international trade, strengthen economic development and hopefully, avoid a second global trade war after the one from the 1930s.
Schoolchildren line up for free issue of soup and a slice of bread in the Depression/Credit:Flickr
Another more recent analogy from the past that could be applied to the current conflict between two of world’s leading economies, is the so-called ‘Chicken War’ of 1963. The duel between the US and the Common Market began when European countries, feeling endangered by US’ new methods of factory farming, imposed tariffs on US chicken imports. For American poultry farmers, the Common Market tariffs virtually meant that they will lose their rich export market in West Germany and other European regions. Their retaliation? Tariffs targeting European potato farmers, Volkswagen campers and French cognac. 55 years later, as the Financial Times reports, the ‘chicken tax’ on light trucks is still in place, predominantly paid by Asian manufacturers, and has resulted in enduring distortions.
President Trump may claim that ‘trade wars are good’ and that ‘winning them is easy’, but history seems to indicate otherwise. In fact, a closer look at previous examples of trade conflicts seems to suggest that there are very few winners in this kind of fight.
For now, all we can do is wait and see if Trump’s extreme protectionism and China’s responses to it will destroy the post-World War II trading system and result in a global trade war; hoping that it won’t.
British farmers are being hit by a shortage of migrant workers and are warning a dysfunctional Brexit will have a devastating impact on their industry. They are calling on the government to provide direction and answers on the future of British farming after the UK leaves the European Union. Bloomberg’s Angus Bennett travelled to Kent, in Southern England, to meet the farmers and migrant workers on the front lines of Brexit.
Video by Angus Bennett and Gloria Kurnik
