Wednesday, March 30, 2016

Startup Hopes to Open Up Agricultural Investments

The Philippines is a rich, fertile country with long winding rivers and multiple lakes. With these topographical characteristics, it would be easy to think that the country's agricultural sector is a major economic driving force. But unfortunately, that is not the case.

The Philippine agricultural sector has lagged behind its neighboring competition. With a whole host of issues like corruption, as exemplified by the Coco Levy Fund, infrastructure problems like irrigation and farm-to-market-road problems and lack of capital, the agricultural sector can be considered one of the most inefficient sectors of our economy. According to a paper by the Philippine Institute for Development Studies (link), 57% of families whose head works in agriculture live in poverty. A good chunk of the workers in the sector don't have access to electricity and potable water which are essential in productivity. Current conditions and a lack of effective leadership has hindered in the development of one of the sector.

With the realities that are plaguing the sector, a startup company by the name of Cropital (link) has sprouted to help farmers gain capital as well as to give potential investors a medium to the sector.

Cropital is a company headed by three young entrepreneurs looking to provide a new market to potential investors. The capital is drawn from people who invest through the website. Each investor is free to choose the specific farm they wish to invest in. Cropital keeps 10% of the farms' profits, investors keep 20%. and the farmers keep 70%. These are desirable numbers for the farmers if you compare it to loan sharks who charge upwards of 40% interest even if the farmers don't turn a profit. It is also a decent alternative to placing their land on collateral. Ultimately, the farmers win because they are given another option to take their business to another level.

Browsing through their website, we will see a focus on high value crops and an absence of rice farms. The long-term crop currently available is napier which is used for renewable energy while short-term crops include beans, bitter melon (ampalaya), tomatoes, cabbages and pechay. As of writing, all farms are fully funded. But liking their Facebook page (link) would keep you up-to-date with more farms in need of funding.

As with other investments, there are risks to be considered. This has prompted the company to find ways to mitigate them. The company has partners with the local governments to help in interviewing and ultimately determining suitable farming partners. Aside from that, the capital to be raised also includes crop insurance from the Philippine Crop Insurance Corporation. Pests are also mitigated as farmers are aided by agriculturists. It seems the main risk investors are to look out for is the market. Because even though the company has their own buyers and even if they cluster up the farms to improve market strength, the market is still a volatile entity. But at the same time, all forms of investment have to deal with market volatility from time to time.

I don't usually publish somewhat promotional posts for my blog. But in this case, I'm not simply promoting a company. I am promoting an approach to farming that should be considered.

Our farms have usually been operated by single proprietors who have to find ways to gain capital to be efficient or, at the very least, operational. With the level of bank-ability of the small farmers that comprise a significant amount of the sector, we have struggled to produce globally competitive goods from the sector. Mar Roxas once alluded to the problem and called for consolidation to improve productivity through economies of scale. But this may ultimately be disastrous to the farmers who are, more likely than not, ill-educated. Hopefully, with a system similar to that of Cropital, farms would have the resources to get with the times and be efficient and self-sustaining. Consolidation or the hacienda system may prove productive with certain crops. But with the help of a profit-driven entity willing to accept the limitations of the farmers/partners' resources, a shift to different methods or even higher value crops prompted by an informed company should lead to productivity as well.

Capital is a major problem for small farmers. And start-ups like Cropital should help with that aspect of the industry.

With the private sector slowly finding effective ways to fund the industry, it's time for the government to put down effective capital outlays to help our farmers. They continue to call for irrigation and farm-to-market roads. Such requirements may only be fulfilled effectively and efficiently by an accountable bureaucracy.


  1. I really hope our agriculture would be given a chance to really expand and grow. We have so much potential and we have a lot of natural resources. I do support products or brands that are helping the Filipino agriculture. I prefer Bo's over Starbucks because it's homegrown. And I love, love, love Human Nature products so much.

    1. People don't understand how big supporting local products can be. Sure, it may lead to inefficiency. But the then again, that unique demand created by simply supporting local products can produce more capital for farmers who can steadily be competitive. Plus, the utility of charity or the good feeling that one gets in supporting something, in this case local produce, is hard to quantify in economics. It may be irrational to some whenever they see someone support relatively expensive local brands. But they fail to recognize that "good feeling".