Agriculture is a broad, ever-changing field that is rapidly advancing to keep up with global consumers and increase yields and profits. A more slowly-evolving sector has been access to financing. Equity crowdfunding is an emerging option to help farmers obtain capital. The truth, however, is that, although farming is a risky venture, it is highly lucrative. And for what it’s worth, credit will go to agro-crowdfunding players redefining the idea of investment in farming as we now know it.
Investment via crowdfunding
The advantages of this kind of entrepreneurial approach are multiple: developing agricultural investment, local production and national business, and increasing skill levels and revenues. This approach demonstrates the continued value of getting younger people involved in agriculture through platforms like AgroDomain, the people behind these businesses are generally aged under 35 and are aware of the potential that digital technology, and social mobilization, can bring to the sector.
These entrepreneurs recognize the risks that accompany these types of business, in particular the potential tensions with farmers or investors if crop production falls below expectations. This is why they also have insurance policies, which cover potential natural disasters and other agricultural risks. If necessary, the insurance payouts should allow investors to be compensated, though, it may not cover all costs, since investors do not always contribute 100% of the capital provided.
Do Your Due Diligence
Future investors and sponsors need to be aware of these risks, even if they are mitigated by the insurance and other measures put in place by the entrepreneurs to support farmers (provision of inputs, farming advice, etc.). A legal framework most also be established, which covers the different parties involved, providing them all with adequate protection from the entrepreneur to the farmer, and from the cooperative to the investor. The young entrepreneurs who invest in this sector must ensure rigorous management of their activities and be aware of the risks and complexities involved, including the responsibilities they have when collecting investment from the general public.
These are a few of the factors that will enable continued smooth growth of this type of initiative, conducted by young entrepreneurs, with its significant advantages for both food security and the African economy. Crowdfunding in agriculture could unlock arable land, improve the wealth of small farmers in emerging markets and deliver strong returns to common people as investors.