Investing In Agriculture Through Regulated Crowdfunding

In recent years, agriculture crowdfunding has emerged as a novel solution to the age-old challenges facing farmers and agricultural entrepreneurs.

By harnessing the power of collective financial support, crowdfunding platforms have revolutionised the way agricultural projects are funded, empowering small-scale farmers, agri-startups, and rural communities worldwide.

Meanwhile, agriculture crowdfunding is a way for companies to raise funds for agricultural activities by appealing to investors. It is a way to help small farms and agritech companies get the funding they need.

In a bid to address some of the challenges posed by crowdfunding operations in Nigeria, the SEC, in January 2021, updated its crowdfunding regulations. The regulations cover a plethora of rules relating to fundraisers, investors, intermediaries and custodians.

Among other conditions, it mandates that crowdfunding intermediaries such as those in the agritech space must have ‘sufficient financial, human and other resources for the operation of the crowdfunding portal, as prescribed by the commission from time to time. It also demands sufficient disclosure by fundraisers to investors about the purpose and use of funds, with the threat of fines for defaulters.

There are different types of Agriculture Crowdfunding Models:

Donation-based Crowdfunding: In this model, backers contribute funds to agricultural projects without expecting financial returns. Donations are typically motivated by altruism, social causes, or a desire to support local farmers and sustainable agriculture.

Reward-based Crowdfunding: Backers receive non-monetary rewards or incentives in exchange for their contributions, such as product samples, merchandise, or exclusive experiences related to the agricultural project.

Debt-based Crowdfunding (Peer-to-peer lending): Investors provide loans to farmers or agri-entrepreneurs, expecting repayment with interest over a specified period. Peer-to-peer lending platforms connect borrowers directly with lenders, bypassing traditional financial intermediaries.

Equity-based Crowdfunding: Investors acquire ownership stakes or shares in agricultural ventures in exchange for their financial contributions. Equity crowdfunding offers backers the opportunity to share in the financial success of the project through dividends or capital appreciation.

Food prices historically increase over time due to the growing demand for food. The United Nations projected that the world’s population would grow to reach 8.5 billion in 2030 and 9.7 billion in 2050. Therefore, it is predictable that the demand for food will continue to grow as well.

Speaking, the MD/CEO of Calyx Securities Limited, Mr. Gbolahan Bello said, “have you ever wondered how that small business in your neighborhood could raise money without going to the banks? Or how people quickly raise funds for medical emergencies on social media? The answer is crowdfunding; a method where many people contribute small amounts of money to support a cause or business.”

He noted that “to stem the increasing actions of bad actors in the crowdfunding space which led to bitter experience of investors between years 2020 and 2021, the SEC had made new rules to protect investors Here are the key points of the rules: only registered platforms can now handle crowdfunding.

So before investing, ensure the platform is SEC-approved.”

He pointed out that real-life success stories in the Nigerian crowdfunding space include platforms like Farmcrowdy and ThriveAgric, which have successfully connected Nigerian farmers with investors, saying that through these platforms, urban dwellers have invested in agriculture, supporting farmers while earning returns.

He added that while crowdfunding offers exciting opportunities to support businesses and causes while potentially earning returns, it is important to invest wisely by consulting a financial advisor before making any investment decisions.

Benefits Of Investing In Agriculture Crowdfunding

Accessibility To Small Investors: One of the most significant advantages of agric crowdfunding is its accessibility. Unlike traditional farmland investments, which often require substantial capital, crowdfunding platforms allow investors to participate with relatively small amounts of money.

Portfolio Diversification: By investing in agric crowdfunding, investors can diversify their portfolios beyond traditional stocks and bonds. It can act as a hedge against market volatility and inflation, providing a stable source of returns.

Geographic Diversification: Many crowdfunding platforms offer opportunities to invest in farmland across different regions and countries, spreading risk and enhancing potential returns.

Overall, agriculture crowdfunding holds immense promise as a catalyst for sustainable agricultural development, financial inclusion, and community empowerment. By leveraging digital technologies, innovative financing models, and collaborative partnerships, agriculture crowdfunding has the potential to transform the agricultural landscape, empower small-scale farmers, and foster resilience in the face of global challenges.