FINANCIAL TECHNOLOGY AND RISK MANAGEMENT IN AGRICULTURAL ENTERPRISES

Abstract

Agricultural sector is an extremely risky environment with high uncertainties, financial, climatic as well as market-related issues that have a great influence on the productivity, income stability, as well as long-term sustainability. This paper will discuss how Financial Technology (FinTech) can be utilized to improve the financial inclusion of people in Pakistan and to manage agricultural risk. Smallholder farmers that make up a significant portion of the national GDP and the employment sector characterized by severe liquidity restrictions, low usage of formal financial services, and high susceptibility to environmental shocks including floods, droughts, and price volatility dominate the sector.

The primary data were gathered via structured questionnaires to select the required data under the form of quantitative, cross-sectional research study and analyzed with the help of SPSS and PLS-SEM methods. The analysis assesses the nexuses between the FinTech adoption, financial inclusion, and agricultural risk management. The results indicate that the use of FinTechs, including mobile banking, digital payment, and digital lending and insurance solutions, can result in a considerable increase in financial inclusion by increasing access to credit, savings, and transaction services. Moreover, FinTech adoption and financial inclusion show a high positive influence on the agricultural risk management and this is associated with better income stability, productivity, and resilience of farmers. Financial inclusion is also a mediating variable, which enhances the indirect influence of FinTech on the risk management outcomes.

The paper concludes that FinTech is a disruptive instrument to use in solving structural inefficiencies in agricultural finance. Nevertheless, digital illiteracy, infrastructural, and regulatory limitations are some of the challenges that should be dealt with to maximize its potential. The results have significant implications on policy makers, financial institutions and development practitioners who want to facilitate sustainable agricultural development in Pakistan.