By creating a tool for rating and assessing the strengths and weaknesses of medium-sized agricultural producer groups, Lucas Simons is able to form a common language and standard of information enabling previously disparate stakeholders to communicate and increasing access to financial products for the agricultural sector. Through Scopeinsight, Lucas provides direct and tangible information to farmers, pinpointing their strengths and identifying areas for improvement.
The New Idea
To combat the persistent lack of understanding and perceptions of high risk in agricultural investment, Lucas has developed a way to efficiently and effectively provide a rating of mid-level agricultural producer organizations, which results in a “profile” of the organization. Medium-size producers (i.e. estates, cooperatives, medium-sized farms, typically employing between 50 to 1,000 farmers) are often not able to access finance, resources or insurance due to the risk involved in investing in farms. However, this specific group of farmers and organizations is expected to be key in providing enough food and resources for the growing global population. With SCOPEinsight’s rating and profile system, Lucas is able to shift the agricultural market from rewarding negative and non-sustainable methods to incentivizing positive, sustainable agriculture and management practices. Lucas works with a previously disconnected set of stakeholders to overcome perceptions of risk and promote financial inclusion, thus creating an entirely new market.
The rating tool is based on a variety of variables used to effectively score an agricultural producer organization. This tool seeks to determine whether a farmer can produce and sell a harvest, getting at the crux of what financial institutions and insurance companies ultimately want to know. There are several factors that contribute to the rating number, which functions similarly to a personal credit score; it shows whether a farmer is bankable or not. Additionally, this information is collected by a cohort of trained, local people, reducing the cost burden of traditional due diligence processes and injecting more jobs into the local economy. Scopeinsight rewards farmers for good practices and showcases farms as viable investment opportunities, providing financial inclusion for millions of medium-sized farmers.
The rating tool used by Scopeinsight is not the sole innovation. The tool is the mechanism by which Lucas works to promote transparency and increase the quality of information sharing. With this rating system, Scopeinsight creates dialogue among groups that traditionally do not understand or trust each other. Lucas works to add value for a variety of stakeholders: he allows mid-level farms access to capital, highlights investment opportunities for financial institutions, and provides an evaluation service for the citizen organizations (COs) working to fund these farms. By bringing these stakeholders together and opening up access to finance, insurance and networks for medium-sized producers, Scopeinsight provides an avenue for producers to receive resources that were previously unavailable. Growth of these particular organizations can lead to greater job creation, more sustainable agriculture practices and food enough to feed an increasing global population. In essence, by opening up access to these resources for medium-sized producers, world food security challenges can be mitigated.
Historically, financial institutions are risk averse. Traditional business models are based on making exponential profit on top of fixed costs, a standard that does not always apply when it comes to agricultural businesses. Since the sector is seasonal and extremely unpredictable, agriculture is considered high risk in the financial industry. Concurrently, many farmers around the world are using outdated methods and are unable to grow, employ people, and increase their viability. To add to this, agricultural due diligence costs are high. The training, travel, money and time it requires to conduct due diligence on a farm with uncertain investment potential is often a barrier for banks. This increases the lack of knowledge and misunderstanding within the sector. In addition, the market surrounding large global agribusinesses inherently disincentivizes good agriculture practice with emphasis on rapid output at low cost. The current global agricultural market rewards suppliers that pay low wages, use harsh farming practices, and do not take care of the land or the people working on the land.
There is a large group of farmers—“the missing middle”—that are often excluded from financial support, insurance, and other services. This group consists of estates, cooperatives, and medium-sized farms that employ roughly between 50 to 1,000 people. These farms are too large to access microfinance capital, which typically support subsistence farmers, and yet they are too small to access the financial services and support provided to larger agribusinesses in their region. For example, many of the 25 million farmers in the coffee industry fall into this middle category and cannot access loans or financing for fertilizer, tractors, or other supplies and equipment that can enable their farming practice to grow.
The lack of willingness to invest in the agricultural sector results in many negative externalities felt worldwide. Despite the demand for food rising due to an increasing population, there is an inability for the agricultural sector to improve production and address this demand as they continue to operate under capacity. As climate change becomes an increasing problem for farmers in certain parts of the world, the inability to invest in better operations forces prohibits any adjusting for the future. Agriculture is still one of the largest sectors in many developing countries and a lack of investment in the sector only limits farms’ ability to grow and create more employment opportunities.
Lucas’s strategy is to create a sustainable, efficient, and transparent system for rating mid-level agricultural organizations. Lucas’s organization, Scopeinsight, takes a unique position in the market by organizing and aggregating previously unexplored information in a meaningful way. He has imbued value into agricultural statistics in developing countries that until now have lacked significance. The innovative rating tool encompasses a variety of factors to assess whether the farms are bankable—including access to inputs, actions taken to mitigate the risk of climate change, and diversity of crops to determine whether a farming organization can produce a harvest. Additionally, other important criteria are the ability to enter markets, political stability of the region, and local infrastructure. Collectively, these criteria help to determine the potential harvest yield.
To help form these ratings, Scopeinsight developed a survey that enables trained local people to be able to quickly and efficiently assess a farmer organization and decreases the need for expensive consultants to conduct the work. In this way, Lucas’s model is creating local job opportunities instead of sourcing large corporations for the work. This survey directly feeds into the creation of the profile for the producer organization. To form these surveys, Lucas has drawn upon his understanding of what banks and other institutions need to know as well as his familiarity with what metrics are most helpful for the organizations. The surveys are meant to bridge the knowledge gap between groups and provide the information necessary for them to engage with each other. With this information, it is easier to push for policy change or added resources in areas where organizations tend to rate more poorly.
The survey takes into account a wide variety of issues in order to enable Scopeinsight to make assessments that go beyond collateral-based lending. Lucas has worked hard to position Scopeinsight in the market as a service provider, eliminating any potential conflict of interest by not providing loans or capacity building. Taking a holistic look at a producer organization allows Scopeinsight to illustrate a broader picture of the organization, one that goes beyond what banks traditionally use to assess potential loan or finance provision. The Scopeinsight algorithm that determines an organization’s bankability is based on a collected set of data points: internal management, operations, financial management, supply, market, sustainability, enablers, and external risks. It is this nuanced assessment that also allows the organization to make changes based on areas highlighted for improvement. It allows other organizations to make assessments on whether the producer organization is fit for technical assistance, insurance, or capacity building support.
Lucas designed Scopeinsight to enable different groups to sponsor and pay to conduct surveys and create profiles of these producer organizations. Financial institutions can fund the collection of data on a specific organization; this information is then also available to the producer organization. In the end, regardless of whether the bank decides to fund the organization, there is still value being provided to the organization. However, COs, producer organizations, or other organizations can also pay for the profiles to be created. In this way, COs are able to attain the same level of detail as the financial institutions and are able to act on that information as they see fit. If financial institutions do pay for the profiles they are offered first right of refusal in regards to financing that producer organization. No matter who finances the creation of the profiles, multiple parties benefit from the information. In addition, Lucas has designed Scopeinsight to ensure that the agricultural organization recognizes the value of the rating system and is willing to pay a small amount for the rating. This fee, typically $1,000 per rating is an affordable sum for the farmer organizations and is used to offset some of the costs of the rating process. This cost is typically 2 percent or less of the loan size required, and is seen by the farmers to be an upfront investment into the future opportunity for a loan or other financial support. With this payment, the farm is rated and also has access to the final rating. The farm is able to see their strengths and also areas for improvement. This rating is added to an online portal where financial institutions can pay to access an entire portal of rated agricultural organizations. The financial institutions pay a much higher price for this access and can also request organizations in certain areas or sectors to be rated. This then enables the institution to review rating profiles of agricultural organizations together and find those which the institution may be most interested in working with. COs are also able to request ratings of agricultural organizations that they work with. Certain COs see the rating tool as an assessment of their capacity building work. Since many COs work with farms to get them professionalized and with hopes of getting them access to markets, the Scopeinsight rating helps to guide the COs on where they are succeeding in their capacity building and also in what areas they need to improve.
By providing these ratings to interested parties to catalyze investment, insurance provision, and capacity building services, Lucas has found a method to transform the agricultural sector and conduct cross-sector, cross-region, cross-country analysis. This system makes it easier to capture trends of success, convert them to best practices and spread them regionally, and can even apply to the dairy, forestry and livestock industries. Already, financial institutions like Root Capital and Oiko Credit have signed on as strategic partners with Scopeinsight, with their goal of increasing their investments in the sector. To date, Lucas has been piloting the model in 12 countries in Eastern and Western Africa, including Kenya, Uganda, Ethiopia, Nigeria, and Ivory Coast. Lucas has also been piloting the model successfully in Latin America. In 2011, 70 pilot profiles were created as part of the effort. After the pilot phase, Lucas made improvements to the rating methodology. In 2012, over 85 paid profiles were requested and completed and Scopeinsight created two strategic partnerships. Going forward, Lucas plans to grow the customer base for the profiles and continue to play the role of a convener between the different groups.
Born in 1971, Lucas has focused on agricultural commodities throughout his career. He was responsible for pushing Utz Certified from certification and training in the coffee industry to also include cocoa and tea and other food commodities such as soy, palm oil, and sugar cane. In his role as Director of Utz Certified, he intrapreneured rapid growth and change for the organization. It was also in this capacity that Lucas grew to understand and know intimately the underlying challenges in agricultural production in developing countries. He recognized that not only is it important for farming organizations to have access to global supply chains, training and certification, it is also vital that they have access to finance.
While traveling back from Guatemala during his time with Utz, it hit him: Why were banks not loaning money to farmers who were certified by global certification groups, trusted and well run? Lucas recognized then the presence of a greater issue preventing the market from serving medium-sized farmers. He knows now that without these farmers participating in global markets, the solution to feeding the world’s growing population will remain out of reach.
Lucas’s background in sustainable development, both on the policy and technology side, has also prepared him for his work driving Scopeinsight. Lucas has an in depth understanding of the flaws of systems and recognizes they must be solved with systemic shifts. He has an inherent passion for this issue and is considered a leader in this field, not only due to his expertise on the topic but also because of his ability to bring groups of people together from different sectors and backgrounds and lead them to solutions. Lucas has also been recognized as a prestigious World Economic Forum Young Global Leader for his accomplishments to date and his dedication to bettering the global society.
Prior to launching Scopeinsight, Lucas started a consulting company NewForesight Consultancy, which expands upon his previous work at Utz and also complements his work at Scopeinsight. Scopeinsight offers strategic advice to companies and organizations on the development of market transformation strategies. Scopeinsight helps bring sustainability into different markets with their transformation frameworks and strategies. NewForesight Consultancy has helped Lucas build networks and greater understanding and access to agricultural markets, which have supported Scopeinsight’s success. Lucas works on Scopeinsight full-time (~70 hours per week) while also continuing to guide NewForesight Consultancy. Lucas plans over the next few years to bring in additional senior consultants into NewForesight Consultancy so that he can eventually transition out.
Due to the nature of the work of launching Scopeinsight, Lucas is often traveling which causes him to spend many days away from his family, including his young children.