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Reducing the risks of investing in agri-preneurs: How this Kenyan is doing it

Published on May 05, 2015

“We discovered that small-scale agriculture in Kenya has an annual funding gap of about U$1bn.”

“There are many young entrepreneurs who are well educated, very savvy and enlightened, and who opt for a career in agri-preneurship. But the one thing they don’t have access to is the financing needed. And it’s always a shock for them when, with all these credentials and plans, they are told by banks: ‘Sorry, we can’t provide finance because you don’t have collateral’.”

However, Farm Capital Africa’s model offers funding without the need for collateral and monthly premium payments by developing a risk-sharing arrangement between Farm Capital Africa, investors and the farmer.

So how does it work? According to Muriu, it all comes down to lowering the risks for investors associated with funding farmers.

For example, the company only invests in projects with a source of irrigation, such as access to a river or borehole, and which does not rely on unpredictable rainfall. All projects are also insured against ‘acts of God’ and field officers are appointed to assist farmers.

Farm Capital Africa also develops contractual relationships with the buyers of the farm produce. “We promise buyers that if they work with us, we have a number of farmers who can deliver produce consistently and at a very good price. So contracts are signed between the buyers and Farm Capital Africa.”

When produce is sold to the buyer, the money goes into a company account, and there is no room for misappropriation of funds by the farmer. Farm Capital Africa then works out how much of the pool goes to the farmer, the investor and Farm Capital Africa. Read more. Source | How we made it in Africa