MICROFINANCE PAPER WRAP-UP: “Using Satellite Data in Financial Inclusion;” published by CGAP

By Maria Fernandez Vidal and Peter Bull, published by CGAP (Consultative Group to Assist the Poor), July 2019, 24 pages, available at https://www.cgap.org/sites/default/files/publications/2019_07_Technical%20Guide_Using_Satellite_Data.pdf

In this paper, the authors provide guidance on how satellite data and data analytics can be used by financial service providers (FSPs) to extend the reach of the products and services they deliver to remote customers, particularly smallholder farmers. Using a case study from Kenya, the authors demonstrate both the potential and limitations of using satellite data to predict crop yields and farmer incomes. One challenge is that the computing power required to process remote sensing data is large, requiring significant investment. Based on the positive results of the case study, however, the authors advocate for further exploration of the potential of satellite data for FSPs, particularly in the following five areas:

“Alternative credit scoring” – data gathered through satellite imagery can help build credit profiles, for example, by estimating past and predicting future agricultural yields of a given plot of land;
“Estimating local infrastructure, housing and income levels” – satellite data can provide estimates of these factors to allow FSPs to identify appropriate markets for their services;
“Assessing the effectiveness of farming practices (including inputs, methods, and crops)” – remote sensing can be used to perform wide-scale assessments of farming practices and develop guidance for farmers on how to improve those practices;
“Calculating crop insurance and risk” – satellite imagery can be used to automate insurance claim evaluations, reducing the cost of microinsurance; and
“Forecasting yields to combat food security problems” – remote sensing can also be used to anticipate poor crop yields to help preempt food shortages.

By Jolene Khor, Research Associate

Sources and Additional Resources

CGAP publication
https://www.cgap.org/sites/default/files/publications/2019_07_Technical%20Guide_Using_Satellite_Data.pdf

MicroCapital post
https://www.microcapital.org/special-report-sam-moral-obligation-include-people-financial-system-harvesting-wins-12k-fmo-fintech-microfinance-prize-use-satellite-data-boost/

CGAP homepage
https://www.cgap.org/

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