Technology

Crowdfunding: A Rising Trend in Agricultural Investment

Investing in the Nigerian agriculture is very important in driving the growth of the agricultural sector and economic sustenance of the nation to meet the demands of feeding the ever-growing population despite the volatile and limited resources. The growth of the agricultural sector in Nigeria has been inhabited by numerous factors especially those relating to lack of adequate financial investments and capital. To fund an agricultural farm is no child’s play. There is a need to provide capital for equipment, personnel, and raw materials.

One of the emerging financing trends to invest in agriculture today is crowdfunding or crowdfarming. Crowdfarming is pretty much new concept and this crowdfunding niche is not yet fully explored, unlike other industries. Crowdfunding makes it possible for agriculture project sponsors to reach large members of individual investors directly thereby broadening the capital structure of a project and work with creative investment terms and conditions.

Crowdfunding in agriculture requires sourcing funds from several individuals to invest in smallholder agricultural enterprises. It entails pooling often small amounts of capital from a large number of individuals usually through fundraising platforms online to fund agro-business or other agricultural projects and initiatives.

It can be faster and more rewarding than traditional fundraising. Crowdfunding is regarded as a feasible and scalable alternative source of funding for agricultural startups and small businesses, charities and other project creators in Africa. So instead of purchasing farmlands and get involved in the laborious daily routine of the industry, agricultural startups such as Farmcenta, enable interested middle-class Nigerians to fund existing farms for a harvest cycle and earn a share of profits in return.

There are different ways of structuring crowdfunding; some of these ways include:

Equity:

In this type of crowdfunding structure, the investor receives an equity interest in the venture financed in exchange for an investment. However, the terms and conditions of this crowdfunding structure vary from case to case.

Debt:

In a debt crowdfunding structure, capital is being pooled from different individual investors and then lent to a borrower or agricultural startup. The main terms and conditions are based on the general lending conditions of the platform and the risk profile of the borrower

Coin:

In this crowdfunding structure, the investor receives a coin or right to receive a coin which is based on the expectation that a market will be created for the coin in which it can be valued and traded.

Reward:

In a reward-based crowdfunding structure, the investor gets some type of reward for his investment which can vary widely depending on the agricultural startup.

Donation:

In this type of crowdfunding structure, donations are made by the investor however the investor does not receive anything in return for his investment.

Crowdfunding has now being recognized as a powerful financial tool in agriculture. It allows smaller investors to partake in promising agricultural ventures of different kinds and also the opportunity for individual investors and consumers to be more directly involved in earlier stages of the food production cycle. Capital from crowdfunding can also fill the wide gap between debt financing and equity investment. Investors must, however, be guarded and analyze investment opportunities with due diligence and even seek third parties’ opinions to understand potential risks and returns of the investment.

Farmcenta is an Agri-tech startup that seeks to improve rural farming by addressing farmer’s critical farming needs such as mechanized tools, high yield seeds, training on climate smart agriculture techniques and off-take harvest to increase food production in Nigeria and Africa. Our mission is to provide an opportunity for everyone to support the SDG 2: Zero Hunger. Learn more by visiting our website at www.farmcenta.com or contact us via Instagram, Facebook, Twitter, or LinkedIn, or via email at info@farmcenta.com.

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