Big Banks Beware, Fintech Turks Are Here To Disrupt

Big Banks Beware, Fintech Turks Are Here To Disrupt

Friday, October 25, 2019 3:41 pm

FarmAlly and Kiakia

By Babafemi Ojudu

Farmally is an agricultural crowd funding platform. It has a small and efficient staff of three. It operates in  a space less than ten square meters in Abuja. Its proprietor, Mr Tunji David, a young graduate of economics  is perpetually on his mobile phone. He is receiving calls from far and near from investors who want to put money in some farm initiatives and similarly from farmers seeking fund to buy one farming equipment or the other or acquiring a processing plant.

His firm links farmers and entrepreneurs in the food chain with investors big and small who have money to invest in the quick return agro industry. An investment in rice cultivation matures in less than five months and returns are quickly given as investment is equally insured. Insurance for the first time is having direct bearing on financial transactions of the common man. FarmAlly works with the National Agriculture Insurance Company (NAIC) that has seen a new lease of life since the 2015 Agriculture revolution.

Move over to Kia Kia Limited. Mr K, as foundly called, is an internet based company that gives access to personal and small business loans, and also enable savers lend out funds at negotiated interests. It is owned and run by Olajide David Abiola. The firm is licensed for peer to peer lending.

Olajide David Abiola

Tunji David

While FarmAlly specializes in agriculture loan, the ones that are avoided like plague by the regular banks, Kia Kia Ltd is broader. Want money, money for entrepreneurial engagements? Have  no collateral? Have no money to pay application fees or lender fees, Kia Kia Ltd looks at the viability of your venture and the passion you are bringing to it. Pronto you get your credit in record time and with no hassles as in the come today, come tomorrow of the regular banks. It is an ideal form of finance, even said to be “Sukuk” compliant! It is in partnership after all no interest. Nigerians are re-discovering their inner entrepreneurship by partnering with them.

These two and many more in the financial sector like Thrive Agric, are initiatives by young Nigerians who have decided to take their destiny in their hand and call the bluff of the ‘arrogant’ and ‘conservative’ financial behemoths. Months and month end of putting paper work together for men and women in suits and ties to get funding that never lead to anywhere is now a click away.

 Babafemi Ojudu

Businesses are latching on, depositors who give cheap money to bankers who then lend to their high heeled politically connected friends at high interest rates while giving them pittance back in low end savings accounts accompanied with high bank fees and levies are getting wiser. Partnership lending via crowd funding is the way to go not banking apparently. Indeed, both systems are insured so the superiority of the banks that give you 0.5% on your money disappears in the reality of financial innovation of fintechs with low overhead cost and now men in expensive suits!

The Fintechs, as they are called, are digital solutions carrying out lending and bringing together investors and entrepreneurs thereby adding value in a disruptive manner in the financial sector.

Farmally, Kia Kia ( which in Yoruba means quick quick) and a number of others which includes Thrive Agric are increasingly getting popular in the Nigeria financial space and giving hope to many young and vibrant entrepreneurs who have hitherto been  frustrated by the big banks who take no risks and abhorred investing  in prospects.

Farmally and Kia Kia Ltd which are very recent startups are full of success stories today. Their poster boy among many others is Mr Reston Tedheke and his farm ventures in Ga’ate Village in Nasarawa State.

Olajide Abiola , a young man who left the army after a short service met Reston, an ex militant in 2017. Reston expresses his interest in going into food production. Abiola provided him a N1.5 m unsecured loan for the cultivation of three hectares of land. That has since grown to a business of N1.5 bn on 3000 hectares of land with almost 500 people employed. If you wonder how, then welcome to the possibilities of finance meet technology. Farming is about inputs, and in a society where we are not constrained by land fertility or size, then whoever can secure finance for inputs can simply do more.

Farm inspection

What do they do? These new lenders use their digital applications to crowd fund from investors. The investors put their trust in them while they too invest  trust in the farmers and sundry entrepreneurs. They aggregate and process the output there from, ensuring to add value up to 500% at an instance, sharing such upside with their member farmers who then agree to do more farming the next year, and kick off a virtuous cycle of growth and productivity instead of the vicious circle of trading and consumption that our banks specialize in kick starting.

From both Kia Kia Ltd and Farmally Ltd , Retson has been able to raise funds to increase his landholding, buy more equipment, built processing facilities, acquire cows, raise turkeys, buy high yielding seedlings, build warehouses on the farm and meet the cost of his overhead. To date his business has grown in leaps and bounds and it is said to now worth close to N1.5bn. The networth can be traced to the ability to do more because they’re not resource constrained artificially by banks, with whom Retson confessed there had been no support. Wema Bank recently came visiting him, let us hope there is a change of mind without the long collateral requirements that are never ideal for real farmers.

An example of their success

Farmally Ltd , I am told , is almost concluding raising N250m to buy 1000 cattle to be placed in a new ranch being built by Reston for milking to provide raw materials for milk and yoghurt producing companies. The company is similarly investing in the acquisition of 60 – 70 tons rice milling plant for the farm so that it could meet the huge demand rice by consumers which has skyrocketed since the Federal Government places a ban on imported rice and closed the borders to ensure non slipped in.

These policies are spurring local production and must be sustained. If banks don’t take advantage of them and re-evaluate their position on agriculture while working with genuine farmers that are properly structured to de-risk their business, without burdening them with collateral they never require from oil and import traders, perhaps they will not be able to participate.

Mr Tunji David of FarmAlly said his company, beyond giving out loans to farmers, is investing in buying paddies from  farmers across the country for  processing and delivery to local market under its own brand name, Farmally Rice. Just yesterday, Mr David delivered 30 tons of paddy at Reston’s farm for processing to meet the demand of rice traders. The paddy, sourced from Taraba State, was procured by funds provided by crowd funders and they expect a bountiful return. Each ton of paddy yield can yield up to sixty percent of its weight in finished rice that will create jobs and stop the cycle of importing poverty.

Another example

Owonikoko Farms,  a forty hectare cattle ranch owned by Vertmance Agric in Keffi, replete with large corn holdings, is also benefiting from the credit made available by Farmally. The ranch proprietor, Engr Mike Oluwagbemi, informed that they have benefitted immensely from credits offered by Farmally Ltd . “ We now have enough funds through crowd funding  to go as far as Ngaundere in Cameroon to buy cattle in hundreds, bring them to our ranch in Keffi and fatten them for the Lagos market .“ Owonikoko  Farms has gone forward to lease abattoir equipment for the slaughtering of cows daily for supply to businesses and individual, all thanks to the credit platforms.

It is already exploring setting up a retail arm, and now has farms in Lagos and Ekiti in addition to its flagship location at Keffi, Nasarawa state rearing ruminants including goat and sheep. Owonikoko is also, thanks to crowd funding, planning to set up an animal feed plant at newly acquired 230 hectares in Nasarawa state.

Daily, these companies, who pride themselves as financial inclusion agents because they drive the enumeration of farmers and arm them with credit and bank accounts, are giving hope to many young Nigerian entrepreneurs without financial history- now doing businesses worth millions of Naira. From employees, to suppliers to building contractors, this revolution is birthing a new Nigeria.

Indeed, they are also posing challenges to the big banks who are shy of giving credits to the less privileged real businessmen, despite spending billions of Naira on advertisements claiming to be so doing.

Definitely, the era of written off loans that disappears in the pockets of the politically connected who are bailed out with taxpayer money via AMCON is giving way to ordinary citizens lending to fund the real sector especially agriculture to fund the food security of their motherland.

With the fintechs and these young turks, it is a new day, a new opportunity for credit seekers, investors and entrepreneurs. They must be supported not regulated out of existence as we learn the Securities and Exchange Commission is planning to do. The Vice President recently visited NFGCS (Retson’s Farm) and commended its partnership with KiaKia and FarmAlly.

Their origin can be traced to the mobile phone revolution and deep internet penetration in Nigeria, and the financial industry must adjust to this reality. Rules even if they’re created must take into cognizance the progress made and innovation developed by self regulation that impose insurance criteria on subscribers. The rule maker must first call a round table of all leading lights of the industry, birthed outside its original rule making mandate. It must write rules that don’t stifle innovation.

Crowd funding as other climes recognize is great for business, it is good for President Buhari’s agriculture revolution and SEC must not be seen to be standing in the way of progress. The newly created Ministry of Communications and Digital Economy can help ensure this.

Like the Start-Up Act of the United States, it may be time to enact a law to exempt crowd funding investors from requirement of regular investing while providing incentives for start-ups and the fast growing digital economy. Idris Bello of LoftyInc operated Wennovation Hub, an accelerator and innovation development firm known for birthing digital companies like Farm Ally and supporting AgriTech initiatives put it well when he described the proposed Start-Up Act as one that “drills down into what is needed to deliberately create, stimulate, support and grow a digital economy”.

The time to innovate our way out of poverty and importation is now, and crowd funding is the right vehicle to deliver this for Nigerians. Let us let them grow.

-Babafemi Ojudu, is the Special Adviser to the President on Political Matters.

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