Crowdfunding a New Dimension for Thai Agriculture
One of the current issues facing Thailand lies on the agricultural sector in which majority of Thai workforces are allocated.
Author: Kriskorn Trachoo
One of the current issues facing Thailand lies on the agricultural sector in which majority of Thai workforces are allocated. Thai farmers have limited access to funding, usually in the form of borrowing with the two popular sources being the Bank for Agriculture & Agricultural Cooperatives and the informal capitalist, both has financial cost. With the recent downward price trend of agricultural products (decreased by an average of 2.5% per year from 2012 to 2017 on price index), farmers are exposed to higher debt burden (agricultural household debt increased by 17% YOY in 2017) as well as facing constraint to improve productivity and invest for opportunities. Using innovation to help expand funding channel for farmers may be necessary and may be one of the potential remedies. By looking at our neighbors in ASEAN, we can see many useful case studies.
iGrow, an Indonesian Start up, is one example where technology of crowdfunding is applied to the agricultural sector. iGrow developed a platform to connect between investors who do not have knowledge or skills in farming with farmers who have skills but lack the funds. The general public who wishes to gain return on their investment can now choose to invest in preferred choice of plantation listed by the company along with an estimate of annual yield and contract period for each. The availability ranges from durian, sugarcane, to livestock farming. After funding period to the public is completed, iGrow will manage and supervise the production in collaboration with participating farmers, as well as coordinate with trading partners and distribute returns to all parties. iGrow is also responsible for engaging land owners to acquire untapped lands to be used in the project, addressing one of the funding issues for farmers. This business model not only expand opportunities and generate income for farmers, investors and the general public can also earn returns. After its foundation in 2014, iGrow has assisted in creating career for 2,000 farmers, bringing about 1,000 hectares of land for agricultural use, and produce 500 tons of agricultural products.
To ensure stable returns for all stakeholders, Cropital; a similar start up from Philippines, has a pre-screening procedure for farmers involved in the project while also referring scholars and specialists for consultation to ensure productivity. They also diversify various crops for each farmer to be responsible, mitigating exposure to market risk. Farm On, another similar start up, constructed a reservoir to prepare for drought as well as drainage way to cope with heavy rainfall.
When looking back at Thailand, the current technology used mostly in agricultural sector is in the form of commodity trading platform and management system. Happy Farmers, a recently founded start up, has developed a marketplace platform connecting farmers selling organic merchandise directly to consumers, reducing the role of middlemen and unfair pricing. Ricult, another start up, developed data analytic system for crop management. However, the concept of crowdfunding on agricultural commodities in Thailand still seems to be limited. By looking forward in the future, reducing farmers to debt exposure may be the key to sustainability for agricultural sector and Thai economy as a whole.