INTERVIEW (Jerry Oche, Founder & CEO, Growsel)
CROWDFUNDING: Alternate Source of Funding for SMEs in the Agribusiness
The Fidelity SME Forum is a weekly radio programme organized by Fidelity Bank Plc to educate, inform, advise and inspire budding entrepreneurs in Nigeria with knowledge and expertise that will enable them build sustainable and successful businesses. The interactive radio programme features subject matter experts and model entrepreneurs as guests on a weekly basis to share their insight and unique success stories. In this interview, Jerry Oche, CEO, Growsel gives valuable insights on “CROWDFUNDING: Alternate Source of Funding for SMEs in the Agribusiness”.
Q: CAN YOU TELL US WHAT SPARKED YOUR DECISION TO LAUNCH GROWSEL IN 2016?
Jerry: I am a product of small scale farming, so I understand that sector very well and I thought to see how I can support that sector, particularly the women, who are our major target. We decided to do something different and ran a trial to see how people will react. Fortunately, people reacted very well and it has become a model we currently use.
Q: EXPLAIN WHAT CROWDFUNDING IS AND HOW GROWSEL WORKS WITH THE CROWDFUNDING MODEL?
Jerry: Growsel works on a totally different model than what is obtainable locally here in Nigeria. Growsel is a non-profit organization, so it is basically social impact. We try to connect farmers and lenders across the divide. When we did the first test-run in Nigeria in the first one year, we were raising money locally to support local farmers. But after our research, we found that we cannot raise money from an impoverished environment to change poverty. So we had to change the model, we now raise money from the West to support people in the South. That is our model and it is at zero interest rate where farmers raise money on the platform through peer-to-peer lending. The money raised is converted into agricultural inputs and given to the farmers. Once harvested, we buy the output from the farmers, sell it then pay back the money to lenders.
Q: WHEN YOU STARTED IN 2016, WHO PROVIDED THE INITIAL STARTUP CAPITAL AND HOW HAVE YOU BEEN ABLE TO GROW SINCE THEN?
Jerry: We have other businesses as Growsel is not our first enterprise. I have an advertising agency founded in 2012 and from there the initial startup capital for Growsel was raised as our major source of funding.
Q: WALK US THROUGH THE PROCESS TO RECEIVE FUNDING FROM THE WEST TO SUPPORT A FARMER IN THE SOUTH?
Jerry: Our research showed that our previous model was not sustainable – raising money locally for the local farmers, because people wanted higher returns on investment and that is not suitable for agriculture because it takes time to cultivate and make money. So we decided to register Growsel in America as a 51C non-profit micro-finance in the States. We have done all the registration and also gotten requisite licenses and was privileged to get a Letter of Determination that shows we are indeed a US registered company and has enabled us to raise money. In the last couple of months, we have also been in talks with in Europe – as we are looking to register Growsel in Europe and developed economies. They have money to give out and not bother about getting returns unlike people in the South.
Q: IF I GIVE OUT A $100 TO A FARMER, DO I GET BACK THAT $100?
Jerry: Yes you get back the $100. It works that a lot of people across America give as low as $20 and above to Growsel. After the end of the farm period regardless of how long the project is estimated to be, the lender gets their money back, interest free.
Q: HOW DO YOU SELECT FARMERS AND WHAT IS THE SCREENING CRITERIA?
Jerry: Initially when we started, default rate was high because of return on investment, but since we have chosen to cease returns on investment, default rate is no longer high. Our research has also shown that the farther the farmer is far from the city, the higher the chance of repayment. We have also noticed that our core focus, women have a higher repayment rate than men. In terms of screening farmers, we try to look at the average basket per the farmer. For Instance, if a farmer meets us and tells us she has 1 or 2 hectares, we can tell how much the farmer needs for every hectare per crop. So a farmer who wants to cultivate a particular kind of crop comes to us, we look at her average basket, ask her some couple of questions, determine if she will rely on that cultivation to feed her family before harvest. All of these data is taken into consideration before we make our final decision. The more the farmer repays her loan, the higher the chance of getting more loans from us.
Q: SO WHAT STATES DO YOU CURRENTLY OPERATE IN AND HOW MANY FARMERS DO YOU WORK WITH?
Jerry: We have worked in Plateau, Benue, Oyo, Kaduna, and currently working with our new partners Technosave to open up in Kano and the North East, giving what is happening in that region, we are trying to work with resettled farmers to see how we can help them.
Q: IN THESE EASY LOCATIONS YOU HAVE SELECTED, YOU HAVE SEEN & PROVEN THAT IT CAN WORK ARE THERE SPECIFIC VALUE CHAINS YOU HAVE SELECTED?
Jerry: Yes, our major focuses were soya beans and maize, but now we are diversifying into tomatoes and cassava. Basically, we can buy from the farmers, or the farmers will provide off takers we have an agreement with that they will buy. In Kano for example, we do not buy tomatoes, but we have people who buy. The same goes for cassava in Oyo state.
Q: HOW DO INTERESTED FARMERS EVEN HEAR ABOUT GROWSEL?
Jerry: We have a unique model, as we do not screen farmers ourselves, but just verify them; what we call a trustee model. We have people we work with that are basically NGOs in these local communities who help us screen and verify farmers on our behalf and get these farmers on-boarded into our system. They make small money from it as part of our extension service and they ensure these farmers carry out the best practices, will cultivate and will make repayments to us. The farmers go to them in the community and if we do not have these trustees in any community, we cannot operate in that community. So we go to a community screen our local partner and get them on-board and they start their field work to get the farmers.
Q: HOW MANY FARMERS HAVE YOU PROFILED SINCE 2016 AND WHAT IS YOUR CURRENT DEFAULT RATE?
Jerry: At the moment, we have 1.5 million registered farmers. The verification for us takes some time because our staff need to visit every location to very these farmers and her next of kin and size of farm to be sure of what the farmer wants. We have now decided to take verification in phases, look at the ones that are immediate and achievable. But above all, we financially include these farmers because we do not pay them in cash. We open up a bank account for them and pay in their monies into their accounts. Through this scheme, last year we won an award for financial inclusion by Visa everywhere Initiative. Last year we signed up 200 farmers and ensured they have bank accounts with a financial partner. This year we are bringing more banks, Fidelity Bank included and we are taking further by becoming an agent banker were we can open these accounts for them remotely and capture their BVNs.
Q: HOW DO YOU MAKE MONEY – EVEN AS A NON PROFIT YOU HAVE TO BE SUSTAINABLE, SO DO YOU MAKE MONEY FROM THE INPUTS, THE SALE OF PRODUCE, OR THROUGH GRANTS THAT SUSTAINS THE OPERATIONS?
Jerry: All of the above, but the major way we make money is through off-taking – we fund farmers and when they are done cultivating, we buy and resell. We also get grants and also get donations from individuals who choose to donate to us and not just the farmers.
Q: WHO HAVE GIVEN YOU GRANTS BECAUSE A LOT OF NIGERIAN ENTREPRENEURS WANT TO GET GRANTS?
Jerry: We are talking to a lot of people, but last year we $25,000 from Visa and this year we got a software donation worth over $200,000 from Oracle and we have some other donors waiting.
Q: HOW HAVE YOU BEEN ABLE TO CONVINCE EXTERNAL INVESTORS THAT NIGERIA FARMERS ARE WORTH INVESTING IN?
Jerry: (Laughs) I think it is very easy; Nigeria is the poverty capital of the world and like I was told in Europe – “if we do not support you, you are going to invade us”. People in the west owe us that responsibility to keep us at a far bay. Also our model is proven that investors get their money back. Even though there may be defaults in one or two instances, most of our lenders have gotten their money back.
Q: CAN YOU TELL US ABOUT YOUR STAFF STRENGHT?
Jerry: Amazingly when we started, we had a whole lot of people, but now we have reduced to just a core strength of 5 people. We have been able to build a structure that works now – the trustee model where people do the verification and screening for us. On our team we have two staff that manage that process to ensure all trustees are following needed guidelines and procedures. We also have the fellowship model which is like an internship program where volunteers can join the business to work for like three to six months and work in their remote locations. We are opening up the fellowship program in Oyo state and in Kano state. We want people who live in these communities to sign up to help farmers in their local communities.
Q: HOW HAVE YOU BEEN ABLE TO OVERCOME THE THREAT OF INSECURITES IN THE THESE HIGH RISK LOCATIONS WHERE YOU WORK?
Jerry: The essence of the social impact of our business is to reach out to these high at risk communities, because they actually need our support most than the developed normal communities. So we are happy to go to these areas, but of course for our own safety, we are focused on resettled communities. In Maiduguri, we do not leave the major cities and we also have people who advise us on where and where not to go.
Q: HAVE YOUR FARMERS BEEN AFFECTED BY THE INSECURITY UNREST AS WELL AS THE CLIMATIC FACTORS?
Jerry: Yes they have been affected. Just last year we lost up to 60 hectares of farmed produce (rice) in Benue. Then we had not gotten our insurance right, but what we do now is to work with NAIC who provide a better coverage than any insurance company, so we are full covered in terms of insurance now. So definitely get insurance as an entrepreneur in Nigeria, it is critical.
Q: WHAT OTHER CHALLENGES HAVE GROWSEL FACED?
Jerry: Building both the Trustee and Fellowship program was a major challenge as we had to travel to these locations to choose the right people. Now we even have a backlog of trustees and fellowship members that we still have not screened. Also getting verifiable off-takers was a major problem. However, we decided to start trading ourselves to offset that problem. Technology is also a major problem – trying to develop our system to where we want it to be and how it will work seamlessly. And of course, lack of funds is also an issue, but we are not waiting till we raise a million dollars, but we are taking it phase by phase.Q: HOW CAN LISTENERS GET INTO PARTNERSHIP WITH YOU OR GET ACROSS TO YOU TO FUND FARMERS IN LOCAL COMMUNITIES?
Jerry: The easiest way to reach us is to tweet at us @growsel or send us an email through firstname.lastname@example.org or email@example.com.Q: HOW DO YOU SCREEN FARMERS AND WHAT IS THE STEP THAT YOU MUST ENGAGE IN BEFORE GROWSEL CAN WORK WITH YOU?
Jerry: We have different types of partners – technical, financial, and donor partners. In technical partners, we look at what structures the partner is bringing to the table; our financial partners support our farmers with funding. We are open to partnership and are working with a new partner to open up a farm hub where we bridge the gap between the farmers and ourselves. We do not have enough trustees for the whole country, so there are some communities that want to get in touch with us, but because of lack of trustees in that location they might not be able to. With a farm hub, farmers can go and buy input from us, crowdfund, or sell to us.