Farmgang

Demand for smallholder agriculture finance in sub-Saharan Africa is about $11 billion, but less than three per cent of this is met. Crowd farming platforms have emerged to fill the gap by supporting farmers who need financial assistance. However, there have been sordid tales about crowd farming operators, including concerns about funds diversion meant for farmers. Stakeholders are asking the government to regulate the sector, DANIEL ESSIET reports.

The International Fund for Agricultural Development (IFAD) said smallholder farms in Africa number some 80 million and supply about 80 per cent of agricultural production. Also, demand for smallholder agriculture finance in sub-Saharan Africa is estimated at $11 billion. However, less than three per cent of this is met.

For analysts, financing requirements for African agriculture remain substantial. Food and Agriculture Organisation (FAO) said expansion of agricultural output of $11 billion would be needed in sub-Saharan Africa, where predominant numbers of farmers are smallholders — estimated at 50 million farms, representing 80 per cent of farms in the region.

Given these huge financing requirements for smallholder agriculture, it is unlikely that African countries, including Nigeria, will be able to raise the needed funds through traditional sources for the sector to thrive.

However, the good news is that innovative agritech businesses are addressing this issue. This has given rise to crowd farming platforms which stakeholders see it as a positive thing.

Abuja-based farmer, Innocent Mokidi, acknowledged the contributions of Farmcrowdy, a digital platform for helping farmers get access to finance. According to him, smallholder farmers are crucial to food production. To this end, he stressed that access to affordable finance was key. However, financial institutions see agriculture lending as risky and costly. As a result, they do not easily lend to small farmers.



Mokidi noted that financial institutions were still being very conservative about lending to farmers and agro-businesses which they consider high risk and market volatile. For Mokidi, while the government has intensified efforts through various policies and interventions to improve agricultural funding including direct loans using banks, it is still difficult for farmers operating small to access capital.

How they operate

Startups who run crowd farming sites obtain funds from “crowd” or the community or individual investors and give them to farmers to grow crops and raise animals.

Farmcrowdy is an online crowd funding platform, which works with small farms that are unable to get the kind of loans to which industrial-scale farmers have access.

Farmcrowdy uses a profit-sharing model,where it splits the post-harvest revenue among sponsors, farmers and itself, it retains 20 per cent of the profits.

Its unique selling proposition to local investors is its ability to offer access to a new asset class, whereby investors can directly invest in various crop from the conveniences of their mobile phones, or home tables/computers.

The platform focuses on empowering 38 million smallholder farmers with resources and mentoring to utilise untapped farmland, expand operation and feed the growing population in Nigeria and West Africa. Farm sponsors, on the other hand, by investing in agriculture, participate in a novel cause that improves the economy and yields a healthy return.

Farmcrowdy works with many farmers, including Mokidi. When the opportunity to expand his operations opened for Mokidi, he turned to Farmcrowdy for help. He is an anchor farmer. The exposure visit to his farm in Nassarawa revealed a huge success. He said if anyone is interested in learning farming from his farm, they are most welcome.

He said crowd funding organisations, such as Farmcrowdy, have emerged to provide a kind of flexible funding adapted to the needs of farmers.

Most experts believe Farmcrowdy pioneered crowd investing in farming in Nigeria.

Since 2017, when it was established by Onyeka Akumah and others, more startups have come on to the scene. These include Thrive Agric, and EZ-Farming. They encourage small investors to fund farmers’ purchase of input and make returns at the end of a farm cycle.

Operators said since the inception of the innovation, the platforms have sourced about N20 billion for agricultural investments using the power of the crowd.

For Mokidi, crowd farming platforms provide a cheaper and less cumbersome financing, as against the lukewarm disposition of banks to agricultural facilities.

Farmcrowdy Chairman Akumah said the startup has expanded to providing a commodity-sourcing platform, where commodity buyers in need of quality produce can source for them.

From a situation of widespread under nutrients, consuming key stables all-year round has become a reality for many households, thanks to expanding activities of genuine agritech platforms.

EZ-Farming, a fast-rising agritech start-up won last year’s Georgetown African Business Conference new venture competition, hosted by the Young African Professionals in Washington DC, United States.

The agritech startup also won the Peoples’ Choice Award at the at Georgetown University’s McDonough School of Business.

The founder of EZ-Farming, Adewale Oparinde, said the feat was another testament to the work put in by the agritech start-up in firming up the base for the investments in Nigeria’s agricultural sector.

According to him, EZ-Farming is the first agritech inter-generational platform crowd-funding to scale small farms into commercial sizes while connecting unemployed youth with experienced farmers via internships-and-funds to start their own farms.

Oparinde told The Nation the organisation has helped small farmers to grow food, especially those who could not benefit from government’s financial support.

Rise of Ponzi schemes

Local crowd farming sites have proliferated and drawing attention from backers and Nigeria now has about 28 of such platforms. To this end, so many crowd farming sites have emerged in the last three years, raising concerns about Ponzi schemes taking over the space. Nigerians have been warned to avoid traps of scammers in the name of agricultural crowd funding platforms offering unrealistic returns on investments.This follows the entry of platforms offering as much as 50 per cent return on investment.

Akumah warned that those startups offering such high rate of rates to investors were apparently to defraud unsuspecting Nigerians.

For him and other stakeholders, 50 per cent return on investment is unrealistic if profit is to be shared among the platform, the farmer and the investor.

Regulation of the space

For public confidence, stakeholders believe it is high time the government stepped in. They believe regulation will help to separate Ponzi schemes from the real platforms.

One of them is the Managing Consultant & Founder, Simply Exponential Consult Limited, Fayo Williams.

She supports the private sector building a large and sound farmer-centric investment portfolio with value chain actors and financial institutions.This will, according to her, increase the availability of affordable, long- term financing to farmers and significant improvements in smallholder farmer livelihoods and incomes.

Mrs. Williams, however, said there was a need to regulate the space to prevent a situation where all ‘Tom and Dick’ would invade the sector and cause harm to Nigerians.

According to her, a free rein will make the space difficult to manage with so many participants entering to do business. However, cautioned that the regulatory bodies should not be too stringent such that it will be difficult for most of the real platforms to operate.

She, however, warned that investors should look for possible red flags when investing in order to secure and protect their investments, both in the long and short runs.

Oparinde said his European counterparts insist on good governance and investors’ funds protection. He noted it was not in the better interest of the industry not to have a regulator.

His words: “No, it is not good. This is why we stopped fixed return on investment. Now we focus on owning a farm where people can see. We stopped because we know there are so many scammers joining the industry. So we try to rebrand before people start losing their money to scammers and Ponzi.”

Oparinde warned: “There is an urgent need for regulation or else people will start losing money in the name of agriculture which is not good for Nigeria.”

The other complaint is that the operators use funds made for farmers for other things.

Oparinde acknowledged that it is happening. “They are just using cash to pay cash. Not really farming,” he said. He added that one of the platforms could not pay their investors.

His words: “Some of our customers who invested with them since we stopped were reaching to me that they couldn’t pay. It is a serious issue if regulators don’t come in.”

The issue, according to analysts, is that most of them has no capital when they started.

Oparinde explained: “Think of it like a scheme. Collect money from A and his money is due, collect from B and pay A like that. Collect from B to pay A and from C to pay B.'”

He added: “If you want to go into farming investment, then be a real one. You will know exactly where the farm is; where your money goes. You can go there anytime. Owning a farm is the model I believe in now and that is why we are pushing it.”

Business innovation specialist, Kenneth Obiajulu said most of the crowd farming platforms started operations without sufficient capital.

Such operators, according to him, represent the weakest actors in the space, poorly financed and unprepared for challenges and could be in difficult situations if there is crisis.

Obiajulu,who is the chief executive officer of One Capital, LLC, Dubai, United Arab Emirates, noted that this could lead them to using investors’ funds that are supposed to be given out to farmers to pay salaries.

He added that it was not in the best interests of such organisations to use funds meant to support farmers to run office operations.n He said startups which use investors’funds for other things would not be able to fulfill their mandate to farmers.

The President. the African Business Angel Network, Tomi Davies, is happy that angel investors are providing important seed money to jumpstart agripreneurs and push them to profitability.

He is an advocate of newer and creative financing options emerging to fill the financing gap for early-stage enterprises to enable them get off the ground. His organisation is playing a crucial role in bringing angel investors together with agro entrepreneurs who need capital to build and scale their enterprises.

The ugly situation in the space, notwithstanding, Davies said he does not support regulation of the sector.

He noted: “I have never been a fan of regulation in Nigeria as it usually becomes a source of corruption. We really should be empowering our people to take care of themselves.”



Competencies of founders

Another factor why some crowd farming businesses are having challenges is because some of their founders have little or no experience in agriculture. The Chief Executive Niji Foods, Kolawole Adeniyi Lucas, said this factor could not be overlooked in explaining the growing number of failed farm businesses.

https://thenationonlineng.net/much-ado- ... platforms/