Farmers leverage Africa’s $2.5b crowdfunding market

Access to finance is a huge problem for farmers. Many of them, particularly smallholders, find it difficult to get credit from banks for large-scale projects. Yet, the World Bank estimates the potential of Africa’s crowdfunding market at $2.5 billion by 2025. To get a chunk of this and surmount the challenge of funding, farmers have turned to crowdfarming. It is an ingenious and technology-driven way of raising money to fund agric projects. DANIEL ESSIET writes on how the innovation is changing the face of farming in Nigeria.

JORDAN Farms Chief Executive Officer, Tunji Olowookere, is riding on the crest of technology to push the frontiers of his farming business. His resolve to turn to a pool of internet-based donors, creditors and investors, operating a crowdfunding market gave him the leverage to grow his agric business by 50 per cent. Crowdfunding, in a simple term, is a form of Internet-based pool of donations, loans and investment capital for small scale business operators, who have difficulty in raising funds from commercial banks. One of such operators, which Olowookere joined, is EZ Farming platform, a crowdfarming platform.

Crowdfarming, essentially an aspect of crowdfunding, is a digital platform of donations, loans and investment capital for farmers and agro-entrepreneurs looking for funds to set up and expand their businesses.

Since joining the EZ-Farming platform, a digital marketplace that helps farmers to finance their business and sell their produce, Olowookere, a cucumber farmer, has seen his business grow by at least, 50 per cent. Essentially, EZ-Farming connects local smallholder farmers to a network of micro-lenders and produce buyers worldwide. With it, farmers have been scaling their farms, accessing better market and earning more income. Olowookere confirmed this much, saying the platform made his farming easy via the provision of access to finance.

He added that the platform also helped with top-of-the-range advisory that enabled him and indeed, other farmers scale their operations and provide employment to youths. “Apart from providing finance, the advisory services improved my business as a farmer. They helped me in developing a sustainable and inclusive growth trajectory for my business,” Olowookere said.

The cucumber farmer admitted that the tremendous growth he has achieved so far may not have been possible if he had relied on conventional options from financial institutions. “I got my funding in less than three weeks after documentation. It was not tedious and can’t be compared to what financial institutions offer. I have grown by over 50 per cent after getting the support,” he said.

The Jordan Farms boss noted that with the support he got from EZ-Farming, he has been able to engage more farm hands. According to him, with such support, farmers can now focus more on production, which would in turn, lead to increased productivity and ultimately, impact positively on the nation’s overall economy.

The EZ-farming platform was a child of the resourceful brain of Dr. Adewale Oparinde, Chief Executive Officer and founder of E-Farms Nigeria, which created the online platform known as EZ-Farming platform. Oparinde said the online platform allows investors to fund smallholder farmers.

He explained further: “We connect local African smallholder farmers to a network of micro-lenders and produce buyers worldwide. We use data and industry analysis to identify smallholders who have potential to go to scale. We provide them with financial resources, other production inputs and technical expertise.”

Oparinde also said the platform focuses on creating more commercial farms across countries in Africa. “We are already in Nigeria, Sierra Leone and Ghana. More countries are currently in the pipeline. We believe that for African agriculture to grow, we need to empower smallholder farmers to create more commercial farms in the continent. This is how we can better meet our local food demands and access export market more effectively,” he said.

He stated further that the start-up was focused on providing investors, who are passionate about the agricultural sector, but without the skills and/or the time required to effectively manage a farm with viable investment options, with returns on investments (RoIs) ranging from 15 to 35 per cent and investment cycles ranging from six months to 18 months.

“Our model is based on identifying the best farmers that can build commercial farms and take advantage of efficient use of technology, professionalism, and economies of scale to maximise profit,” Oparinde said, adding that as a part of the partnership, farmers are required to provide paid internship opportunities to unemployed youths, who are recruited at boot camps conducted periodically by EZ-Farming.

He said the start-up, which started pilot operations in September last year, has an ambitious mission to pull funds to boost the operations of promising smallholder farmers to become commercial farmers and provide a competitive RoI, build a cluster of apprentice commercial farmers among the youth, and ultimately, boost productivity in the countries where it has operations.

Oparinde, a Cambridge-trained agricultural and resource economist, with field experience working with a Washington DC-based international agricultural research organisation, said the platform was aimed at building an army of commercial farmers on the African continent through an incentive-driven community effort.

He explained that the start-up has different packages, which include irrigated chili farms, piggery farms, poultry farms, cassava farms, and soybean farms. According to him, its revenue model is based on taking a negotiated share of profit from the farms and giving a share of this to investors.

EZ-Farming, he added, also connects farmers with land and facility owners thereby improving access to resources required to grow their farms. According to him, the platform provides 3-layered protection on investor’s money through farm insurance, planned credit insurance, and video monitoring.

“What EZ-Farming is doing is basically redefining agriculture as we know it, and at the same time, building a new generation of commercial farmers that are tech savvy and who will benefit from investment from others in the agribusiness space.

“What we are doing is to pull funds on our platform, get them to upcoming commercial farmers to expand their farms or set up a new farm unit, where a number of unemployed youth would learn the ropes, after which they also set up their own farms,” Oparinde added.

He said the inspiration for the start-up came with an extensive work in international agricultural research and non-profit sector during which he visited more than 10 developing countries and engaged with farmers trying to scale their operations.

“With a deep knowledge of working with farmers, extension agents, development organisations and private sector companies, I believe what we are doing will change the game in the African agricultural sector,” the expert said.

The Nation, however, learnt that Olowookere is not the only Nigerian farmers benefiting from this new-found way of getting round the challenges of funding by conventional banks and other business support services to farmers. A poultry farmer in Lagos, Mr. Yusuf Oyolu, has also leveraged the innovation to expand his business.  “I have approached other financial institutions operated by the government in the past, but it wasn’t this smooth. At the time, they were not so focused on agriculture. To them, agriculture takes a longer gestation time, but EZ-farming is making access to finance easier and more attractive to people,” Oyolu said.

According to him, it takes longer time to obtain a loan from banks, but with EZ-Farming, it takes less than three weeks. “The documentation is straightforward. We get the funding to get on with the work in a timely fashion, which helps decision making and other issues that affect our output,” he said.

Essentially, the EZ-Farming platform, which so much excites Olowookere, Oyolu and indeed, others farmers, particularly smallholder ones, revolves around crowdfunding. The Nation learnt that with bank loans hard to come by, many farmers are now looking at it as an alternative source.

“One of the new sources or models is crowdfarming, which is an aspect of crowdfunding. It is a form of Internet-based pool of donations, loans and investment capital for farmers and agro-entrepreneurs looking for funds to set up and expand their businesses.

Indeed, farmers especially smallholder ones, struggle to raise sufficient capital for their farms, as the banking system is difficult for them to access. This is due to most banks requiring collaterals and having a lengthy and complicated application process and unfavorable rates,” he said.

Justifying the resort to crowdfunding or crowdfarming (as it relates to farming), Tech Circle Founder, Mr. O Nwoye told The Nation that the growth of Nigeria’s agricultural sector has been constrained by a myriad of factors, especially those relating to inadequate investment capital.

According to him, crowdfarming is fast becoming the easiest means of investing in agriculture. This, he said, entails sourcing funds from several individuals to invest in smallholder agricultural enterprises. He, however, pointed out that the concept is new, almost untouched, unlike other industries.

Nwoye explained that agri-tech start-ups are launching crowdfunding platforms to tap into a large pool of financial investors to support farmers. According to him, the emergence of digital platform-enabled crowdfarming is providing poor farmers access to scalable and sustainable financing, giving the nation’s sluggish agric sector the needed boost.

The Tech Circle founder also said individual and organisational investors in Nigeria and the rest of the world are supporting such start-ups to improve the lives of farmers while growing the investors’ Return on Investment (RoI) through net profit sharing scheme. He said returns are made in less than six months and range from 3-30 per cent.

More importantly, the resort to crowdfunding by Nigerian farmers, The Nation gathered, was aimed at cornering a large chunk of the overall market potential of the crowdfunding market in sub-Saharan Africa estimated at $2.5 billion by 2025, according to the World Bank.

As far as farmers, who have thrown their hats into the crowdfunding ring are concerned, Nigeria, Africa’s largest and most populous nation, is strategically positioned to exploit the opportunities offered by the bourgeoning crowdfunding market. For one, the country has abundant fertile soil.

Also, her agriculture industry is one of the main contributors to the economy, accounting for more than 13 per cent of Gross Domestic Product (GDP) and employing 65 per cent of the workforce. It also provides income for the majority of the nation’s households.

While these are not in doubt, promising indices for various operators and stakeholders in the agric sector, have shown that Nigerian farmers are more than four times poorer than the general population.

But an aggressive push to change the narrative via crowdfunding has taken the centre stage. Those behind this new and strategic push are not only encouraged by the favourable outlook as enunciated by the World Bank, but the need to give farmers a new lease of life in a lending environment that does seem to encourage conventional banks to look their way.

Other agri-tech platforms weigh in

EZ-Farming has recorded significant progress, growing from over 50 active investors, who have committed more than $330, 000 to support several farmers in Nigeria in the first two months of business. It has operations in Nigeria and Sierra Leone and will be launching operations in a host of other African countries soon.

However, it is not the only agri-tech platform in the crowdfunding or crowdfarming space focused on enabling users to access funds to invest, own, and manage farms. Farmcrowdy, another crowdfunding company, launched in Nigeria in 2016, currently boasts over 11, 000 small scale-farmers across Nigeria.

To-date, the platform has amassed an active sponsorship base totalling over 1,000. Its total investments from outside Nigeria is also in excess of £1,620,000, with a growing number of sponsors located in the United Kingdom (UK).

Its CEO and Co-founder, Onyeka Akumah, said Nigerians in the Diaspora have the option to not only send money home to their families for their up keep, but also build their personal investment portfolios through investing in one of the country’s largest sectors: agriculture.

Another agri-tech company, ThriveAgric,  connects small scale farmers with sponsors who invest in crop cycles. It uses a crowdfunding platform to provide farmers with the finance they need to grow their businesses and offer ordinary people the chance to invest in agriculture.

ThriveAgric works with smallholder farmers in Africa to give them access to finance, best practices, and linkages to big buyers upon harvest. It gives individual investors the opportunity to fund a farm, empower farmers, learn practical agricultural tips and share in the harvest.

The platform was founded in September 2016, and launched publicly early 2017. Since inception, it has worked with over 1, 000 farmers directly and 2, 800 farmers indirectly. ThriveAgric crowdfund investments for smallholder farmers and provide those inputs, tech-driven advisory and access to markets.

Farms are listed on the platform, complete with details of what it takes to fund a unit, such as an acre of rice or 100 chicks, the length of time until return, and the returns themselves. Subscribers can then fund these units by paying online and receive regular updates on what is happening on the farm, from planting to harvest.

They can receive their funded sum and any returns after harvest. The funds are used to purchase inputs, buy insurance, and market the produce. ThriveAgric raised funding from the Abuja-based Ventures Platform accelerator in 2017 and is now actively working on expanding to other markets.

It has a 40:40:20 profit-sharing model, with 40 per cent of profits going to farmers, 40 per cent to subscribers, and the start-up taking the remaining 20 per cent. However, its big challenge has been building out its farmer clusters and then getting trained extension service workers.

There is also Farmkart, another agric-tech platform, where people can invest in livestock farming to increase local food production, support farmers and get returns on their investment.

The goals of Farmkart is to make an impact on food security, support local farmers by creating capital and jobs, as well as promote youth inclusion in agriculture.

How crowdfarming operates

To invest in these online farms, users are required to sign up on the site and choose from short-term or long-term investment options. They can then use their virtual wallet to pay for these investments. Once the payment is complete, resources are given to the farmers, and the wait begins.

After the harvest is sold, investors get a share of the profits in addition to the money they invested. This share varies depending on the crops and risk conditions. But the platforms appeal to a variety of investors, Nigerians within and outside the country.

Stakeholders speak

Aje farms Chief Executive, Mr. Adegbami Samuel, said the role of agri-tech start-ups in creating crowdfunding platforms is crucial as they open viable options for access to finance to farmers.

He said because of digital platform penetration, especially in rural markets, rural-based farmers can stay clear of liquidity crisis. According to him, many farmers own land, which they are currently unable to use due to lack of investment.

According to Samuel, this is because financial institutions are reluctant to invest in the agricultural sector, as they judge the risks to be too high. But through digital platforms, farmers can access funds, which they could potentially invest in agriculture. The benefits generated are then shared among the farmers, crowdfarming digital platforms and investors.

To Nwoye, crowdfunding is an impactful way to serve the low-income market. According to him, each individual investor can choose how much he wishes to invest based on the available resources.

He said there is an additional social pressure to run the project effectively and this improves the chances of success because the owner of the project knows the investors involved are likely to keep tabs on its outcome. .

The challenges

However, as exciting and hugely rewarding as the emerging crowdfunding space appears, it is not without challenges. For instance, agri-tech platforms still face roadblocks in terms of market, weather and harvest uncertainties and other risks associated with farming.

Also, investors in a crowdfarming projects are generally passive, limited partners, while the land-owner is the active partner, making all the decisions, including what to grow, when to plant, and where to sell the harvest.

Niji Group Chief Executive, Kolawole Adeniji, said one challenge with the concept of “funded farm” implemented by digital enabled crowdfarming platform is the fact that investors do not have the opportunity to visit their funded farms and see things for themselves.

He said they only view their funded farms as a transaction entry on the page. This, according to him, implies that the investor is essentially in the dark throughout the tenure of the investment. Investors are not allowed to visit the project site to see the progress of their investments.

However, the greatest obstacle to the successful operation of sustainable and profitable farms remains inadequate access to finance. This, ultimately leads to cash-flow related problems, which are believed to be the prevailing reason for the failure of farms and other agro businesses.

Traditional financial institutions are generally reluctant to serve farms and farmers due to the high costs associated with the business. This lack of financing for farmers has exposed the gap in the nation’s lending and borrowing market, and has encouraged development in the sphere of social lending, also known as crowdfunding.

Experts, therefore, believe that crowdfarming or crowdfunding eliminates the need for traditional financial institutions in the context of farm financing, providing farmers with a convenient and flexible online funding platform, which offers low fees and charges, and advantageous terms and conditions.