A few years ago I had the privilege of working as the business development advisor to a startup that was pioneering the first rent-a-greenhouse project in Kenya. The project targeted young urban professionals who would lease green tunnels and pay for water and management costs in order to grow tomatoes that had a ready market.
The idea proved popular with the target audience but was discontinued when the founder sold the tunnels to the owner of the leased land and took up an international job posting. This eye opening experience is what led to the development of the conceptual framework for a mobile based crowd driven funding platform that could capture a wider user base of young farmers – Mobicrop.
Since then we have approached individual farmers, youth groups as well as farmer organizations and banks as part of our hypothesis testing. We strongly believe that our solution is timely, relevant and will gain necessary traction among young farmers looking for alternative funding channels.
Mobile money has seen tremendous uptake and innovation amongst the young upwardly urban population who comprise our investors. Second generation mobile money development has enabled the uptake of popular short term mobile money based loan products such as M-Shwari. Despite this, none of these products is specifically tailored to farmers due to their unique needs.
It is this lack of a distinctive mobile based investment product tailored to young farmers that has informed our product development. Our discussions with young investors and investment groups point to them being very receptive to a product that would enable them to make short term mobile based investments that could net them significantly higher returns than bank deposits or ‘idle’ mobile money deposits carried on their phones. Due to this, we are confident that the development of a demonstrable prototype is the main obstacle to success.
The team behind Mobicrop is currently comprised of me and my co-founder who is a commerce graduate, CPA and a former management consultant with extensive corporate experience within the East African region. We are committed to developing the platform on a full time basis once our prototype is ready for testing. We have both worked on the concept development and covered our legal and logistical costs out of pocket.
Our greatest challenge lies in the technical development of the platform. For this, we are in the process of evaluating the most cost-effective options such as outsourcing, white labeling or in-house development. We have begun negotiations with a potential technical partner who is already developing a pioneering real estate crowd funding portal. This is for the purposes of our prototype roll-out and demonstration.
Our energies are currently devoted to looking for support to develop a fully functional prototype that will integrate with mobile banking technologies. We have already managed to complete the initial design phase of a USSD driven investor registration application that rides on already existing mobile banking channels as outlined below:
Mobicrop investors become qualified and registered to select and participate in farming ventures through SMS text via the following easy 5 step process
Step1. Open a Mobile banking account by dialing *844#
Step2. Text the word “invest” to the Mobicrop short code (eg78278) to qualify as an investor
Step3. Users automatically receive an SMS text back with an embedded URL to tap on their mobile device
Step4. Follow the URL to the Mobicrop site where you will be “opted in” and presented with information and links to set up an account, create a profile and submit any required information for accreditation
Step5. After receiving a confirmation text, users become qualified to invest in any farming venture on the Mobicrop online platform via their Mobile banking account
Once a user is qualified, approved and accredited by Mobicrop, a simple 4 step process secures investments.
Step1. When registered, approved and accredited investors see a farming opportunity worthy of their investment, they text to a Mobicrop short code(eg. 78278) the ID code of the farming venture to indicate their intent to invest with the featured venture.
Step2. Investors receive a return SMS text offering choices for the amounts they wish to invest.
Step3. Investors text their amount and effect the transaction from their Mobile banking account, securing their investment in a queue which also “opts them in” to receive communication from the farming venture receiving their investment.
Step4. If the “investment text” is received and approved prior to the cap amount being fulfilled, the investor receives a confirmation text. All appropriate paperwork is sent via mobile and/or email. Note: If the “investment text” is received after the cap amount is reached, the investor receives a text informing them the investment was not accepted.
I do concur that the seasonal nature of farmers income is a barrier to accessing lines of credit. A recent article in a farming magazine run by a leading Kenyan daily attests to the challenges young farmers face when trying to access bank financing:
We would like to address this in two ways. Firstly, our solution is based on shariah compliant, profit and loss sharing contracts. Returns are based on an agreed upon fixed percentage of the net profits of the farming project. Our initial focus is on youth groups engaged in production agriculture who are looking for working capital to finance single crop production cycles.
Youth groups apply by submitting an online form and a small online video pitch of three minutes. Investors on the site can rank each video pitch on a scale of 5 stars and the best pitches are chosen to present their idea to 2 online mentors for due diligence and further investor preparation.
By incorporating a panel of online mentors to include agronomists and business development experts, young farmers gain guidance on farm and business planning as well as tools to make a compelling investor pitch of their farming project.
Our screening process involves identifying tangible opportunities and preferably already-in-place contract buyers as well as conducting interviews with applicants.
The second way is how we address risk. Our solution is based on ‘risk pooling’. This means that a cap is set on the amount of money one can invest on a farm. This is to encourage the spreading out of smaller investments to different farming projects so as to lessen the risk.
An important component of Mobicrop is 'crowd intelligence' in the form of debating farming opportunities openly before they can be put forth to the online mentors. With their 3 minute video pitches young farmers induce debate and investors to the site can give their ratings and comments to various pitches. These comments and ratings of pitches provide valuable insights but only the most viable farming opportunities take a step further and are presented to the crowd for investment.
Approved applications and supporting business plan summaries are uploaded onto the Mobicrop platform as investor ready farm pitches and are viewable to members. The loan requested is divided into equal parts or ‘shares’ which are then offered to members on the platform. Mobicrop members can then pool mobile payments to make profit participating loans to the farming projects profiled on the platform.
Membership shares are uploaded by transferring funds from any participating mobile money platform.
Members are free to withdraw or move their funds into any project of their choice until the funding goal is met. Once the funding goal is met, funds are transferred to the funding project through the partner bank.
Mobicrop aggregates the funds and works with the partner bank to disburse the funds to the project and collect repayments. The whole process is concluded electronically and funding is disbursed through the banking partner on a milestone basis .
Farm projects access inputs through registered suppliers via mobile money payments. At harvest time, loan repayments are deducted from the gross proceeds of the contract buyer prior to disbursing any surpluses to invested members on a pro-rata basis.
We intend to make the entire farm investment process crowd driven and mobile based with the added value of investors being able to receive updates via social media tools. Through this, investors would also have the added advantage of knowledge sharing on crop production cycles that are replicable, profitable and sustainable.
We are looking for the support to cover the costs of developing the mobile money based platform prototype as a minimum viable product. By conducting proof of concept trials and leveraging on partnerships with banks, our vision is to create the largest social media funding channel for Africa’s young farmers.