Lessons for crowdfunding platforms in Nigeria’s emerging agro-financing landscape
Aderemi Ojekunle is a Businessamlive Reporter.
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October 13, 20201.3K views0 comments
Agriculture in today’s world has transformed beyond the traditional production of food for human consumption and animal feeds into a global financial stronghold and economic reserve. Understandably, to harness the challenges of sustaining a growing world economy and overcome the problems of food production, climate volatility, modernised policies and urbanisation trends, the agriculture sector has to be diversified and flexible enough to link more capital with agricultural projects, albeit digitally.
One of the agricultural financing trends that have come to the fore towards actualising massive investments and returns in the agricultural sector is Crowdfunding. ONE to ONE, a corporate finance website defines crowdfunding as a technique for financing business, artistic or other projects and initiatives by pooling often small amounts of capital from a large number of people, in many cases through fundraising platforms that are set up via the internet.
In the agricultural sector, crowdfunding is a platform that makes it feasible for agriculture project sponsors, to directly reach large numbers of individual investors, broadening a project’s capital structure and experimenting with more creative investment terms and conditions. On a global scene, crowdfunding has become an increasingly important element of agriculture sector finance and Nigeria is not left out. Today, we have several of these crowdfunding start-ups and the most notable ones include: FarmCrowdy, ThriveAgric, FarmKart, PorkMoney and E-Farms Nigeria.
These emerging start-ups have become one of the easiest and most convenient means of agricultural investment whereby funds are being sourced from several individuals to invest in smallholder agricultural enterprises. But just when it seems crowdfunding is beginning to receive interest and massive engagements from Nigerians, ThriveAgric, one of the leading platforms, got smeared in a financial controversy leading to public outrage and threat of legal actions from aggrieved investors who laid complaints about their inability to either withdraw their investments or get returns as promised by the platform.
Business A.M. gathered that the agricultural technology crowdfunding startup, which was founded in 2017 by Uka Eje and Ayo Arikawe, was created to provide access to finance, premium markets and data-driven advisory for smallholder farmers. More importantly, it was built to make it easy for subscribers to fund farms and agricultural projects with the promise to provide profitable returns within a farming season or stated period which, in most cases, is between 6 and 9 months.
How ThriveAgric works
To create an account and access the site, one is required to register by filling a name, email and password after which a ThriveAgric personal account is being generated. The user can then access the site via a personalised dashboard. The user is presented with an array of crops/ farms to select an inves.
Thereafter, the payment is made to the stipulated farm account. The platform does not have a specific amount as production cost of crops/ farms differ but the percentage increase is determined by the quantity of money invested. It is the particular crop/ poultry option the user chooses and units that determines the amount to be paid and expected returns. The time frame of getting returns of proceeds is also determined by the planting-harvest period of the crop chosen.
Things however took a different turn when ThriveAgric failed to pay its subscribers the profitable returns at the stipulated time of agreement. This raised suspicions from many of the subscribers who demanded an explanation for the delay. Why ThriveAgric faltered on payments In a bid to assuage the situation, Uka Uje, the organisation’s CEO addressed a mail to the affected subscribers stating the reason for failing to settle them financially as planned.
The email read: “Thrive Agric primary revenue source is based on a successful harvest (inclusive of crops and poultry). “When a planting season or harvest is lost, like we did this year, ThriveAgric can only hope to earn such lost revenues from subsequent harvests. “In our case, we have previously communicated to subscribers that we would meet our obligations based on overdue payments from off-takers. Some of those payments have come in, but not nearly enough to meet our obligations to subscribers.
“In the last week, we have communicated timelines for repayment to our subscribers of up to 24 months depending on the specifics of their subscription. “We expect to payout before the committed due date, but in the past, we have been aggressive in our expectations and not met them. We do not want to continue to disappoint our customers so we have given a timeline that we can more confidently keep.”
Aggrieved subscribers react
In response to the mail, many of the subscribers took to the social media (Twitter) account of the start-up company to complain and demand an immediate refund of their investments.
Tega Ajogun, a subscriber wrote: “We demand that our money is paid back as when due, anything else is unacceptable. The worst thing about all is that I have been seeing regular updates on their websites indicating my rice farm was a success, so how come they can’t pay up?”
Damilola Emmanuel wrote, “I invested since September 2019 and my money was due to mature in June this year. I invested over N2 million and whenever you contact them, they either ignore you or reply curtly. “You were not only a trusted brand; you are supposed to be the second biggest agritech firm in Nigeria. You should have gone to any length to maintain ethical standards in your dealings,” wrote Ayokunle, another customer.
On Monday, October 6, at least thirty-six affected investors signed on to an ultimatum mandating Thrive Agric to pay up to N50 million owed to subscribers of the agritech’s farm investment programme. In a statement published by Muhammed Akinyemi on behalf of the investors, they demanded a written and signed legal note from ThriveAgric stating that the investments expected will be paid immediately.
According to the group, they had been upset with the lack of communication since May when ThriveAgric first indicated that the pandemic had started disrupting its ability to fulfil its commitment to investors.
The group’s statement also alleged that the company had in fact started defaulting on payments since March, before the pandemic took hold in Nigeria.
ThriveAgric announces leadership restructure
Facing public outrage and threat of legal action from perplexed subscribers, the start-up decided to announce a readjustment in its leadership structure and assure subscribers of its commitment to effect their payments soon.
On October 8, Uka Eje, the CEO released a statement on the Twitter page of the company where he stated that the organisation had come up with structural changes to steer the business out of its current challenges. He disclosed that he had relinquished his position as CEO, a position to be temporarily occupied by Adia Sowho while he assumed the position of chief operating officer (COO), working as Adia’s understudy.
He also announced the appointment of a chief financial officer (CFO) to effectively manage the organisation’s financial capacity while Ayo Arikawe, the co-founder, retained his position as chief technical officer (CTO). “Amidst all these, we have been engaging with various regulatory bodies to ensure that we align as expected. We hope that with these improvements across the organisation, ThriveAgric is better prepared to weather this storm and emerge stronger than before,” the statement concluded.
Venture Platform wades in
Ventures Platform, a partner company also released a press statement dated October 8, 2020 in which it pacified subscribers stating that efforts are underway to rectify and repair the situation by ensuring subscribers are repaid in a timely manner. The company further explained that its senior management team and hired consultants had intervened and worked alongside ThriveAgric founders to not only ensure repayment of investments to subscribers but also to align the business for the long term.
Venture Platform also promised to facilitate a more consistent communication with the aggrieved subscribers via email, zoom calls and Twitter to address their complaints.
Are Agro-crowdfunding investments worth the risk?
Having reneged on many of its initial promises, the company might have completely lost the trust of its subscribers, some of whom not only want a refund of their capital but are also questioning its legitimacy with some investors labelling it a ponzi scheme.
In light of this, Business A.M sought the opinion of the public on agro-crowdfunding in Nigeria and how issues such as the ThriveAgric situation can be averted in the agricultural sector.
Iyare Harrison, a farmer and agriculture analyst noted that crowdfunding investment platforms are legit and he has benefited from one of them. He added that though there are times challenges and yields do not come as expected, there ought to be transparency and subscribers should be duly updated about what is going on.
An investment startup operator who spoke on condition of anonymity advised subscribers to take their time and study the market before venturing into any crowdfunding investment. According to him, everyone is interested in generating revenues from such investments but understanding the risks involved and underlying assets should be a priority.
Jeremiah Apariola, a website developer opined that agro-crowdfunding investments have so far been a success in Nigeria and the ThriveAgric glitch is something unusual. He however stated that initiating an agro-crowdfunding platform requires an indepth research and knowledge of the agricultural system.
Ezekiel Maume, a trader stated she can’t invest in any online-based crowdfunding agricultural project because she doesn’t trust them. She asserts that she can only engage in a project she is physically engaged in. “I don’t really support investing in something that is not well grounded, a platform without proper planning can’t withstand the turbulence of hard times,” said Eno Umoh, a teacher.