Green Fintech Driving Caribbean Climate Resilience And Food Security

In the Caribbean, the rise of financial technology is not just a trend—it’s a beacon of hope for aligning economic prosperity with sustainable development, especially in the face of mounting climate vulnerability and food insecurity.

A recent report by the Inter-American Development Bank, IDB Invest, and Finnovista paints a vivid picture of the fintech boom in Latin America and the Caribbean, showcasing a staggering 112% growth between 2018 and 2021. This surge signifies more than just numbers— it symbolizes a transformative wave poised to uplift economies and nurture sustainability across the region.

In the heart of the Caribbean, where nearly two-thirds of the population lacks access to traditional banking, the ascent of fintech holds promise like never before. But this promise isn’t merely financial; it’s a lifeline in the face of climate change and food insecurity.

Caribbean nations face a harsh reality— a reality where climate impacts wreak havoc on their shores, from extreme weather to rising seas, habitat loss to water scarcity. These challenges, compounded by small economies, leave the region’s Small Island Developing States vulnerable to global economic shocks, making the quest for climate resilience a daunting uphill battle.

For countries heavily reliant on imports for their sustenance, like those in the Caribbean Community (CARICOM), the global ripple effects of climate-induced food crises hit close to home. With three-quarters of their food sourced from abroad, any disruption in global food systems reverberates through regional markets, driving up prices and exacerbating food insecurity.

According to the World Food Programme, over half of the Caribbean’s population grapples with food insecurity, a reality exacerbated by external crises like the conflict in Ukraine, which sent regional food prices soaring by an alarming 10.2% in 2022 alone.

But amidst these challenges, there is the hope of innovation poised to reshape the Caribbean’s destiny.

“Green financial technologies have the potential to usher in a new era of sustainable development for the Caribbean,” says Alfonso García Mora, Vice President for Europe, Latin America and the Caribbean at International Financial Corporation (IFC) of the World Bank. “The fusion of finance, sustainability, and technology presents an exciting synergy for the region. Through green fintech, the region can tackle critical challenges by boosting financial inclusion, stimulating market growth, facilitating intra-regional trade and collaboration, and introducing innovative financing options for both public and private sectors. This paves the way for sustainable and inclusive economic growth.”

The Caribbean stands at the precipice of change, ready to harness the power of green fintech to navigate the complexities of climate change and food insecurity. With groundbreaking technologies paving the way, sustainability isn’t just a goal but a promise of a brighter tomorrow.

Here are some examples from the region.

Driving Financial Inclusion: Caribbean FinTech Sprint

Without acknowledging the impact of climate change on vulnerable populations including women, small business owners, smallholder farmers, and the youth, no development initiative can be deemed sustainable. Financial inclusion is critical in this regard.

The Caribbean FinTech Sprint for Financial Inclusion is a collaborative endeavor led by the Trinidad and Tobago International Financial Centre (TTIFC) and the United Nations Capital Development Fund (UNCDF)–European Union (EU)–The Organisation of African, Caribbean and Pacific States (OACPS), alongside other esteemed partners, with the objective of harnessing fintech to democratize financial services, extending accessibility to a wider demographic, including those residing in under-served, rural or remote regions.

At its core, the Sprint is about empowering both local and global FinTech visionaries to confront pressing challenges faced by Caribbean people. From empowering smallholder farmers with e-commerce platforms to revolutionizing digital payments for credit unions’ under served users, and streamlining remote onboarding processes for D-Cash, the Eastern Caribbean Central Bank’s Digital Currency, the Sprint is a catalyst for transformative change.

Among the Sprint awardees were MLajan Financial Technology Services Ltd (Dominica), Paymaster Limited (Trinidad & Tobago & Jamaica), Rhino Partners Pte Ltd (Singapore), and Unqueue Distributors Limited (Trinidad & Tobago).

Additional engagements are being explored with Zeepay Ghana Limited (Ghana), mMoney Inc. (Barbados), and Zed Labs Limited (Trinidad & Tobago) to develop proofs of concept and pilot solutions.

Climate Resilient Financing: Barbados Blue Green Bank

Caribbean nations have some of the most burdensome debt levels in the world. With government debts averaging 90.1% of GDP since 2020, the region surpasses the World Bank’s threshold for developing nations. In response, Caribbean governments are championing innovative climate financing and seeking enhanced access to resources to bolster their resilience against climate-related challenges.

Under the leadership of Prime Minister Mia Amor Mottley, Barbados has spearheaded the Bridgetown Initiative, which seeks to revolutionize the accessibility of climate financing for developing nations by reforming global financial systems. One of the pillars of this holistic approach is the Barbados Blue Green Bank.

As a sustainable climate finance institution, Barbados’ new Blue Green Bank is dedicated to driving innovation within the financial sector. Its core objective is to catalyze growth in securities and loan markets, unlocking additional funds to support initiatives focused on climate change mitigation and adaptation.

Amit Garg, CEO-designate for the Blue Green Bank, says that prioritizing digital infrastructure will bolster the bank’s flexibility, rendering its model more readily replicable and nurturing innovation over time. The Blue Green Bank’s digital strategy also facilitates efficient risk management through data analytics, leveraging both micro and macro data.

Shock Responsive Social Protection: World Food Programme Caribbean Multi-Country Office

When exposed to shocks, vulnerable populations require immediate access to funds to address their pressing needs. The World Food Programme collaborates with partners to deliver direct aid to vulnerable populations affected by crises that exceed national and regional capabilities.

In this capacity, WFP encourages or facilitates the use of financial technologies to guarantee the swift, dependable, and transparent flow of funds to those who desperately need it following a climate event.

“Climate change will increase the severity of hurricanes, and small island states are on the frontline,” explains Sarah Bailey, Head of Programme at the World Food Programme (WFP) Caribbean Multi-Country Office.

“Recent experiences in the Caribbean show how governments and organizations can harness innovative solutions like digital cash transfers to reach people quickly with assistance when disasters strike. A next frontier being advanced by WFP is providing payments before storms hit so that vulnerable people can stock up and prepare.”

Through its collaborations with regional governments, World Food Programme utilizes digitization as a tool of meaningful change to help improve social protection systems in the Caribbean.

Providing Credit to Farmers: Farm Credibly

According to Jamaica’s National Financial Inclusion Strategy (2016-2020), fewer than 10% of Jamaican farmers can access credit, and a meager less than 2% of the country’s commercial lending portfolio is directed towards agriculture.

“In Jamaica, it is much easier to get a loan to import a car from Japan than it is to get capital to put into agricultural production,” says Varun Baker, Founder of Jamaican agricultural fintech company, Farm Credibly. “The large financial institutions largely ignore agriculture, despite its 7% contribution to GDP. I know that agriculture is far less than 7% of the lending portfolios of these institutions.”

Farm Credibly provides unbanked farmers with access to financing, utilizing alternative credit scoring methods, derived from evaluating the real economic activity of farms as reflected via electronic records of business transactions.

Agri-Ecommerce: Jamaica

In Jamaica, e-commerce platforms and digital marketplaces empower farmers to establish direct connections with consumers, circumventing intermediaries and consequently, amplifying their profitability and market reach.

“From small boutiques in Trinidad in the South to agribusinesses in Jamaica in the North, companies are expanding their reach through online marketplaces and digital storefronts,” says Allison Hunte, Co-Founder and CEO of the Fintech Islands Experience (FiX).

The Agrilinkages Exchange (ALEX) an e-commerce endeavor of Jamaica’s Rural Agricultural Development Authority (RADA), dedicated to linking over 400 farmers with diverse marketing prospects, spanning tourism, gastronomy, exports, processing, and beyond helped to facilitate more than $6 million US dollars in earnings for Jamaican farmers in 2023.

There are also a number of Jamaican e-commerce sites that sell agri-food products. In 2020, The Jamaica Business Development Corporation (JBDC) introduced Things Jamaican E-Commerce, showcasing over 2,000 products from its existing base of 423 clients. One notable category featured on the website is Nyammings, focusing on food products.

Agri-Fintech For Smallholder Farmers: Innovatech

In Latin America, the International Fund for Agricultural Development (IFAD) Innovatech project merges digital solutions in agricultural technology (AgriTech) and financial technology (FinTech), enhancing accessibility to markets as well as financial and non-financial services for small-scale farmers in Bolivia, El Salvador, Guatemala, Haiti, Honduras, and Mexico.

“Economies have gone digital and global and local food systems are following suit,” says Rossana Polastri, IFAD’s regional director for Latin America and the Caribbean. “It’s time for small-scale farmers to have access to the new services and tools that can connect them better to this new economic environment. Only in that way can they go beyond subsistence production to become prosperous entrepreneurs, able to ensure the livelihoods of their families and communities.”

Complementary Currency For Trade: Carib$

As a complementary currency exchangeable to all CARICOM currencies, Carib$ (CaribCoin) holds the promise of reducing dependency on the US Dollar and foreign correspondent banks, thereby unlocking new pathways for intra-regional trade.

In the face of mounting economic pressures, the CARICOM region has set forth a bold vision with its 25% by 2025 strategy, a strategic food security roadmap designed to address soaring food import costs, bolster intra-regional trade, and cultivate wealth generation through agriculture across all CARICOM Member States. Under this model, Carib$ emerges as a catalyst for change, presenting opportunities to facilitate trade within a region where reliance on food imports reaches staggering levels of up to 90%.

Drawing parallels to the introduction of the Euro in Europe, Dr. Jan Schröder, Chief System Architect, paints a vivid picture of the potential impact of Carib$.

“Reducing the food import bill of the Caribbean by 25% until 2025 is a shared goal of Caribbean politicians and businesses. Achieving this will have great positive impact on food security in the region. A major obstacle to do so lies in the dysfunctional financial sector of the region, leading to substantial non-tariff barriers for regional agrifood-trade. By harmonizing trade through a single currency while preserving the integrity of national currencies, Carib$ offers a transformative vision for the future of the Caribbean.”

United Nations Environment Programme Finance Initiative (UNEPFI): Republic Financial Holdings

Republic Financial Holdings Limited (RFHL), headquartered in Trinidad, is actively shaping a sustainable finance sector in the Caribbean. As the only institution from the English-speaking Caribbean to be a signatory to the Global Principles for Responsible Banking, and as founding members of the Net-Zero Banking Alliance, under the United Nations Environment Programme Finance Initiative, RFHL says that it aims to achieve net-zero greenhouse gas emissions in its financing activities by 2050.

As part of its climate finance goals, RFHL has pledged to finance, invest, and arrange $200 million by 2025 to address the impacts of climate change and build climate-resilient infrastructure across the region. The group plans to achieve this in part by promoting accessibility to electric vehicles, supporting the development of renewable energy technologies and transitioning away from fossil fuels, providing loans for energy-efficient projects and climate-resilient infrastructure, backing initiatives that promote environmental sustainability, renewable energy, and the blue economy and committing to LEED Certified Standards for all new properties by 2025 and enhancing the environmental efficiency of existing properties.

Fintech solutions are playing an increasingly pivotal role in accelerating the transition from traditional fossil fuel energy sources to renewable alternatives. By leveraging innovative financial tools, fintech companies are simplifying the funding process for renewable energy projects, making them more attractive to investors. Furthermore, fintech platforms are employing advanced analytics and machine learning algorithms to assess the environmental impact of investment portfolios. This enables investors to make informed decisions, driving greater funding towards green initiatives, renewable energy projects, and sustainable businesses.

Chad Blackman, Barbados Minister of Economic Affairs and Investment believes that the Caribbean’s private sector has an immense role to play in driving green fintech to redirect capital towards initiatives that address the specific challenges encountered by the region’s climate vulnerable countries.

“Given governments’ limited fiscal space, but yet the high demand to spend on priority areas, fintech presents a unique opportunity for the private sector to be able to offset some of the needs that governments would have,” said Minister Blackman in a panel on sustainable banking at the Fintech Islands Experience (FiX) 2024 conference in Barbados. “Of course, governments will raise revenue through taxes and traditional areas, but I think there is a role that the private sector has to play. It has to be a whole of society approach; it cannot be government alone. Government has to act as the regulator, offering an environment that allows the private sector to play its part.”

Minister Blackman has advocated for the development of an inclusive steering committee to drive ideas, innovation and implementation in green fintech that can be leveraged to drive sustainable growth in the Caribbean.

By facilitating climate adaptation, climate mitigation, and enhancing food security, green fintech plays a pivotal role in steering capital towards initiatives that align economic growth with environmental responsibility. Fintech has the potential to revolutionize the Caribbean’s economic landscape by promoting financial inclusion, facilitating climate resilience financing, enhancing supply chain transparency, enabling data-driven decision-making, and fostering digital marketplaces.

By harnessing the power of technology and innovation, the region can align economic growth with sustainability, thereby addressing the dual challenges of climate vulnerability and food insecurity.