Enhancing Financial Inclusion in the Mexican Countryside

Q: How would you describe the overarching strategic shift FIRA is undergoing to ensure the Mexican countryside remains a pillar of national economic stability through 2030?

A: Mexico’s agricultural sector is unique. When comparing Mexico to countries like the United States or Brazil, it is evident that land tenure is significantly more fragmented, creating a large disparity in technology access. In Mexico, the average landholding is 5ha, compared to 180ha in the United States and 80ha in Brazil. This fragmentation requires financing mechanisms that are fundamentally different from those used in large-scale agricultural economies.

While certain regions in northern and northwestern Mexico mirror the large-scale models of Brazil or the United States — utilizing high-volume, long-term credits for productive infrastructure — FIRA’s primary challenge lies with small and medium-scale producers. Over the last eight years, we have implemented a strategic pivot to reach these producers through alternative pathways.

In many remote rural regions where successful crops like coffee and berries are grown, traditional commercial banks are no longer a practical solution. Consequently, FIRA has focused on expanding its resource dispersion through a broader and more diverse network of non-bank financial intermediaries. This includes savings banks, popular financial societies (SOFIPOs), SOFOMs, and credit unions that were specifically established to finance agricultural producers. We have refined our financial products to meet the needs of these intermediaries, leading to a significant expansion of our network. In 2018, we worked with 90 financial intermediaries; by 2026, this network has grown to 150, the vast majority of which are non-bank entities. This strategic shift toward smaller-scale producers is supported by essential instruments, including guarantees, specialized financing, and technical assistance. Furthermore, FIRA has invested heavily in new technologies to help these intermediaries reduce credit origination and supervision costs, ensuring high-quality, low-cost financial services for the sector.

Q: As a "non-supported" budgetary entity that relies on its own income, how does FIRA balance its social mandate of rural inclusion with the institutional need to preserve its quity in real terms (VRAP)?

A: FIRA operates under a corporate structure that adheres to the Ministry of Finance, but it is distinguished from other intermediaries by the critical role played by the Bank of Mexico. The central bank is a key strategic partner that enables FIRA to maintain economic solvency while financing high-risk segments. To achieve this, FIRA invests heavily in risk management mechanisms. We employ an asset and liability management strategy strictly oriented toward preserving equity, alongside a pricing mechanism that accounts for both risk and balance sheet management. This approach allows FIRA to maintain a stable capital trajectory.

The institution's profitability objective is to keep capital constant in real terms, meaning it must grow at the rate of inflation each year. This mandate is reflected across all operational areas, including credit origination, risk measurement, the assignment of limits, portfolio recovery mechanisms, and the design of guarantees.

This strategic focus has allowed FIRA to maintain a non-performing loan ratio of 3%, which is consistent with banking industry standards. Furthermore, it has ensured that our capital has remained at its constant real value since 2013.

Q: How is FIRA incentivizing the adoption of AgTech — from satellite data and geospatial intelligence to fintech platforms — to bridge the persistent productivity gap between large agribusiness and smallholders?

A: Industry 4.0 is already a tangible reality in the agricultural sector. The Internet of Things, cloud computing, AI, remote sensing, and robotics bring massive opportunities for rural financing. It is now possible to use satellite imagery to assess the crop vigor of an agricultural plot. This can be done not just for a single point in time, but as a time series spanning the last 10 years, thanks to available satellite archives and interpretation algorithms. Consequently, a new wave of specialized satellite visualization providers has emerged. FIRA has invited these providers to join our platform, Agritech Nexus, where nine tech companies — including Sinecta, Panoramo, FastFarm, and Hidrosat — offer high-end services.

FIRA has updated its operating rules to allow financial intermediaries to use these digital tools to replace traditional credit supervision processes. This significantly lowers costs and improves risk prevention. Intermediaries can now target their physical inspections only to plots that trigger an alert based on plant vigor indices or meteorological data, making supervision much more economical.

Building on this, we have developed quantitative risk prevention tools, such as scores that indicate whether a plot is in good or bad shape. We are even developing tools for income estimation. By analyzing 10 years of satellite data for a plot, it is possible to estimate production levels for specific crops. When combined with market prices, we can estimate a producer's income from a desk, overcoming what has historically been a major barrier to agricultural credit. FIRA is building these specific algorithms, with a primary focus on corn.

This technological wave extends beyond satellite visualization to include online scoring services, digital origination processes, and e-commerce platforms for agricultural products. There are now tools for agro-price and insurance comparison, as well as specialized services that provide alerts for pests or specific guidance on irrigation timing and volume. Our initiative has been active for one year with nine platforms, and it continues to grow steadily. 

Massive databases are critical for activating true AI. We view our platform as a vehicle to gather the necessary data, which can then be utilized by service providers to develop the AI behind these tools. While this represents our medium- and long-term vision, the platform is already a reality, connecting FIRA's clients with technology providers for their mutual benefit.

Q: How are major commercial banks adapting their offering to mee the demand for financial services from small and medium producers?

A: We officially launched the platform at the Association of Mexican Banks, as part of a collective effort to open new channels for financial inclusion. During the event, the banking sector committed to refocusing on the agricultural industry, recognizing that many traditional credit barriers are now being dismantled by these technologies.

Agricultural credit has historically been one of the most complex financial products due to factors like meteorology, price volatility, the producer's technical capacity to secure a harvest, and geographic remoteness. Through these digital platforms, we are bringing the management of complex agricultural credit down to a level comparable to consumer credit. This shift is undoubtedly helping commercial banks return to the sector. We are already seeing specific banks place a renewed emphasis on agricultural SMEs by utilizing our platform.

While not every bank is involved yet, we understand that individual institutions may not invest in developing these platforms themselves because agricultural lending represents only a small fraction of their total portfolios. Consequently, FIRA views this platform as a public good for rural credit. FIRA has the capacity to invest in this infrastructure and share it with the broader banking system to facilitate their participation in the field.

Q: What is FIRA's approach to sustainability within the sector, and what role do green, social, and blue bonds play within this strategy?

A: Our sustainability strategy is built on three pillars. The first pillar ensures that our financing does not negatively alter the environment. We achieve this by implementing methodologies such as the Equator Principles and Environmental and Social Risk Management Systems (SARAS), which involve an environmental impact review conducted with the same rigor as a credit analysis.

The second pillar focuses on providing targeted financing to companies investing in technologies that mitigate greenhouse gas emissions. This effort has generated a significant portfolio of green bond-eligible assets. The third pillar involves engaging third parties in addressing the environmental challenges within the agricultural sector. Thematic bonds, particularly green bonds, have proven to be the most effective instruments for demonstrating to investors and society the environmental impact of agriculture, the existing mitigation mechanisms, and the tools available for climate change resilience and adaptation. While green bonds also serve to fund FIRA’s activities at a slightly lower cost, their primary value lies in this engagement.

Our thematic bond program operates across greenhouse gas mitigation, efficient water use, and agricultural adaptation and resilience. In the coming months, we plan to innovate with a new bond focused on the conservation and expansion of biodiversity. Although biodiversity bonds are complex to structure, we believe focusing on soil biodiversity provides a solid foundation for this instrument. In addition to green bonds, we maintain a line of social bonds focused on gender and financial inclusion. This year, we may also pursue a Sustainability-Linked Bond (SLB) dedicated to micro-food sovereignty.

Q: What challenges and opportunities remain in water efficiency and conservation?

A: Water management can be divided into three levels: primary management through dams and large canals, intermediate management involving canals that deliver water to the edge of a plot, and on-farm management within the plot itself. FIRA is actively involved in the second and third levels. At the intermediate level, we maintain funds in coordination with CONAGUA to guarantee credits for improving infrastructure, such as secondary canals and pump efficiency, ensuring water flows effectively to the field. This work is conducted through irrigation districts and irrigation modules, primarily utilizing credit guarantee products.

The most active line of work is on-farm irrigation systems. FIRA offers financial products that have previously included interest rate discounts of 1.5 to 4 percentage points for farmers investing in high-efficiency systems, supported by EU resources via the French Development Agency (AFD). While those specific resources have diminished, FIRA continues to provide internal benefits, such as higher guarantee percentages or lower funding costs for these projects. For example, when lending to a SOFOM for an irrigation system, we may provide 100% funding, whereas other projects receive smaller percentages.

A critical component of our strategy is the accurate measurement of water use. Through our Agritech platform, Mexican producers can now access technology from Hidrosat (formerly Eriwatch), a company used by the FAO and in California to measure irrigation water via satellite. This platform provides historical data on water usage for a specific plot over the last five years. We view this data as an essential first step toward developing interest rate discount products linked to specific key performance indicators (KPIs).

Q: What core philosophies guide FIRA's "interculturality" and gender focus to endure that development is equitable across all Mexican territories? What role does providing services in indigenous languages play in this strategy?

A: Effective inclusion occurs when the supply of credit and the demand for credit successfully meet, particularly for women and indigenous communities. On the supply side, the offer must be tailored to their specific needs. FIRA provides the majority of its credit to women through microfinance and the group-lending models made famous in Bangladesh, which operates well in Mexico. We work with about 15 intermediaries specialized in this type of credit. In many ways, the supply already exists across the country for both men and women through these mechanisms.

However, for women and indigenous communities, the primary obstacle is creating effective demand. A woman may need credit, but without a guaranteed source of repayment, she will not be able to access it regardless of the financial instrument available. To address this, half of FIRA's staff — roughly 550 people — are deployed in the field. They do not distribute credit directly; instead, they help women identify buyers for their products, provide technical assistance to meet the quality standards required by those buyers, and accompany them to the intermediary's window once those capacities are developed.

For example, in the Sierra of Veracruz, there are many producers of coffee and vanilla. FIRA works with large processing companies, such as Gaya Vainilla, Café California, and various Mexican and German firms. We establish agreements with these companies to supply them with local producers. FIRA organizes these producers into groups, provides technical assistance, and ensures the product is delivered to the large company upon harvest. The credit is then repaid through that sales process. This credit only flows when the producer is integrated into this value chain — a task that a traditional bank simply will not undertake.

For demand to be effective, these women and indigenous communities require this hands-on support. Our focus is on demand, helping women overcome structural lags and a lack of resources so they can become viable candidates for credit. 

Q: After nearly 30 years in the financial sector, what have you identified as the most significant structural change in the "bankability" of the Mexican rural sector, and how do you see the sector continuing to evolve looking to 2030?

A: The most significant transformation in the sector undoubtedly arrived with the free trade agreement, which fundamentally changed how the Mexican countryside is managed and developed. The initial years were marked by high levels of difficulty, adaptation challenges, and the loss of certain subsidies. This period was particularly harsh for grain producers, as the comparative advantages of other countries became immediately evident.

However, the landscape shifted over time. Around 2015, Mexico’s trade balance turned a corner, becoming a surplus after many years of being in deficit. That trade balance continues to grow in Mexico’s favor. This evolution occurred because the sector pivoted from a strictly domestic focus toward export-oriented production, attracting numerous companies that promoted the cultivation of specific high-value products. Berries are perhaps the most well-known example of this development, as they leverage Mexico’s comparative climate advantages. We see similar success with vegetables, tomatoes, peppers, and broccoli. 

FIRA has adapted its instruments to help producers manage this transition from basic grains to more resource-intensive, high-value crops. Crucially, we help connect them with established value chains led by anchor companies that help them succeed. We are particularly encouraged by cases where the anchor company is owned by the Mexican producers themselves, and we see many such examples in the citrus and tomato sectors. We also support cases involving foreign companies that provide a high degree of security for the producer. In these dynamics, FIRA addresses the credit needs of large companies to facilitate product purchases, providing them with working capital or funding for storage and processing infrastructure. This, in turn, allows us to finance the medium-sized producer and, above all, integrate them into a stable commercial cycle.

Q: What work still needs to be done to achieve FIRA's targets for 2030?

A: There is still a significant pending task in attending to small-scale producers; therefore, increasing the number of small producers who receive credit remains our highest priority. Additionally, ensuring that agriculture remains profitable for producers is essential, which is a particularly notable challenge for grain production this year. This requires massive efforts to reduce costs and secure prices for them. FIRA is investing in new products, such as price hedges, to provide certainty against one of the greatest risks they face.

To the extent that we can increase the number of accredited small producers and keep the grain sector strong, we will have successfully navigated a year that is very complex due to the geopolitical landscape.