Unveiling the future of Agribanking: Desjardins

As we continue to explore the role played by financial institutions in supporting farmers and driving sustainable growth in agriculture, this week we look at how Canadian financial services cooperative Desjardins Group is dealing with the challenges and opportunities in this sector. Sylvain Morel, Vice-President, Agriculture and Agri-Food Market Development and Business Relations at Desjardins, shares insights into the agribanking landscape in Canada and Desjardins’ initiatives to promote sustainable farming practices among its members.

Could you briefly provide insights into the agricultural banking landscape in your region, highlighting any unique challenges the industry has to cope with?

The Canadian agricultural banking landscape is highly competitive. In Quebec, six banks, Desjardins Group and Farm Credit Canada offer farm loans and a specialized farm account manager service.

In Quebec, institutions that play an important role in granting agricultural credit fall into three categories. First are the traditional financial institutions, meaning Canadian banks and financial cooperatives. Second is Farm Credit Canada, a federal government lender that provides credit directly to agricultural and agri-food businesses. Third is the Financière Agricole du Québec (FADQ), which provides loan guarantees in Quebec. Besides its loan guarantee program, the FADQ also offers support programs and advisory services. The loan guarantee (100%) protects institutions from losses and, as a general rule, the FADQ takes a supportive approach in difficult situations. The Ministère de l'Agriculture, des Pêcheries et de l'Alimentation du Québec (MAPAQ) offers a number subsidies and supports to ensure agricultural succession and the adoption of practices and technologies to foster innovation, economic performance and environmental performance.

In terms of the main challenges, , I would highlight the following points:

• Competition between financial institutions remains high, as agriculture is seen as a growth sector with long-term potential.

• The significant and rapid rise in interest rates is a major challenge for farmers, who have to contend with rising costs in general.

• Climate change is increasingly apparent, forcing lenders to intervene more often to support their clients and prompting agricultural producers to adapt their practices.

• Business consolidation is on the rise, and the service offer has to reflect the financial needs of increasingly large companies in the dominant sectors (dairy production, grain production, fruits and vegetables, pig farming, etc.).

• With an eye to increasing food self-sufficiency, large-scale and innovative projects (greenhouse complexes, vertical farming, etc.) are diversifying the client base and making it necessary to adjust the financing offer.

Could you share examples of successful innovative projects or initiatives implemented by your institution? Feel free to highlight the ones that leverage technological advancements such as digitization, AI and data analytics in agricultural banking. Were these developed in-house or through external partnerships/JVs?

There are no specific technological initiatives developed directly by Desjardins Group in agricultural banking services that make it possible to use data from agricultural businesses. In the agricultural sector, AI technologies and major innovative projects linked to sustainable development are in the start-up and development phases. Desjardins is open to these projects, which lead to expertise development. We are the financial partner of La Coop Agri-Énergie Warwick, the very first agricultural cooperative dedicated to the production of renewable energy in Quebec.

Desjardins has invested in and developed a partnership with Solution Aleop, an external company that markets a tool for digitally capturing invoices/documentation and automatically transferring them to the farm’s accounting system. This solution improves administrative management and allows users to base decisions on financial and technical-economic data. We promote the solution among our members and offer a discount to those who opt to use it. No data is transmitted between this system and Desjardins’ banking platform.

What are Desjardins’ key priorities in the agricultural sector for the next 2-3 years, particularly in terms of sustainable agriculture, digitalization, and addressing the challenges faced by smaller farmers?

Our priorities include developing ESG products and services for agricultural businesses; equipping and educating our front-line teams on sustainable farming practices and helping them identify ESG risks; and equipping and educating our members on the various GHG-reduction practices and any other practices aimed at boosting climate change resilience.