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.

We do love getting scammed, don't we?

It's been an uneventful past few days for this blog. As some who have read my posts may see, I like writing about politics and a bit of music. It's just that, scanning the news, nothing has really piqued my interest. Though Joel Villanueva is making my head turn, I don't feel like writing about instabilities in his party.

These past few weeks though, there are two issues that have been making the rounds. One of them is the sudden rise of incidence of scamming; the other one is food poisoning which I may write about later. I remember a week ago, a relatively young woman was nabbed by authorities for scamming P500 million from unsuspecting families by saying that the investment is backed by the Parañaque City government. Just last night, GMA reported a "paluwagan" system that turned out to be a scam.

Scams have been really prevalent lately. I'm not gonna discuss how they are done. There are lots of papers as well as news articles about scamming people. Deehan1914 gives us a decent look at the history of one of the most profitable scam tactics out there.

What I am gonna do is ask a question. Why do we Filipinos love getting scammed? I mean, it sure looks like it.

Thinkpesos tried to answer this question but I found it lacking. Greed and gaining easy money are connected. And as the article mentioned, greed is pretty much human nature. I mean, who wouldn't want easy money? Who wouldn't want to double their investments in a month's time?

These attitudes are inherent to every human being no matter what people say. The problem with these attitudes is that they usually take over without proper education. 

Thinkpesos.com nailed it on the head when it listed the lack of education as the main reason why Filipinos get scammed a lot. I imagine that you, the reader, at least finished high school. Now ask yourself, how many times was financial literacy tackled in your class? Compare that to the number of times you had to determine the past participle of a verb or the value of x in a function. I wouldn't be surprised if banking and finance was not even tackled your whole high school life. I mean my school never thought to mention how important it is.

I'm not discarding the importance of algebra or grammar. But why did I have to take up a class in college to get a glimpse of how to manage my money?

I know some of you may be thinking it's so easy to search the internet for reviews before entering anything. The SEC provides a checklist of what to look for when looking at an investment opportunity. But would the normal, casual Filipino know about this stuff?

We Filipinos are not really good at investing. I mean look at our GDP. The Commission on Filipinos Overseas recently released a news article stating the lack of financial literacy in the country. We love to save and are not as hot-wired to consume as Americans who are more susceptible to max out credit limits. But we are not as knowledgeable when it comes to saving efficiently.

The question of "why do we love to get scammed?" may be answered easily. It's because we don't know any better. Sure, it is important for individuals to start looking for resources to read. But why don't we just instill it in basic education? We're adding two years to basic education with K-12 anyway, right?

Basic education is the ideal place to start building the groundwork of a financially literate population. A large chunk of the population goes through it and I think that if you have money to invest, you at least finished high school unless if you are a blue collar OFW which is a major target of scammers.

Scammers usually target OFW's because compared to us who work in the country, they have more money. And another major reason for being targeted is the fact that a lot of OFW's never studied in college and had the chance to take up Banking 101. Or maybe they did finish college but their course did not call for the study of the banking sector. They also don't have much time to be here and the sense of urgency in taking advantage of an opportunity is a bread n' butter of scammers.

Scams in the news today may lead one to think that only idiots get themselves in these messes. But who’s to say who’s an idiot? I mean we willingly spend a hundred pesos for a cup of coffee at Starbucks and they’re the idiots?

Everybody at some point will get scammed in some way. But by focusing on finance in basic education, maybe Filipinos won’t love getting scammed as much.