Leadway Assurance executives offer insights into agric-tech investments in Nigeria
Agric business value chain very volatile with lots of challenges, concentrated risks Crowdfunding associations can push for legislation, create the operational standard to protect investors
IN THE WAKE OF RECENT CONTROVERSY surrounding the arrangements guiding crowdfunding investment in the agric-tech space in Nigeria, senior level executives at top private sector insurer, Leadway Assurance, have been offering broader explanatory and deeper insights to educate the general public.
The Leadway executives, who are insurance experts in their own rights, addressed the prevailing issues around insurance coverage for agric-tech investments in Nigeria through a virtual media roundtable meeting in a bid to explain how insurance has helped the agricultural sector’s value chain and Leadway’s role in capital investment, interest and insurance when it comes to crowdfunding.
Adetola Adegbayi, executive director, general insurance, Leadway Assurance, who led discussions at the virtual event, which was monitored by Business A.M., said crowdfunded debt crowdfunding is not shares where you have to have an established relationship with the traditional exchange.
She said there are several angel investors with years of performance for 2-3 years in crowdfunding, who could have the fund developed for the acquisition of farmland, poultry or livestock because they have experience and then pay back a certain percentage from the total pooled fund to investors after a stipulated period.
“Donation type of crowdfunding is when people are not using the money for farm investments but for personal purposes. Speculative risk is when you put money in which you may not get a return but you will get your money as business may trade at a loss. While the pure risk is when money raised is invested in a project. Here, money is not necessarily lost because of low yield. The risk can be transferred to an insurance company as low risk basically yields a low return,” Adegbayi explained.
She also highlighted things to consider when investing in a business as identifying the firm’s unsophisticated and or dispersed investor base, potential corporate governance and communications challenges, the need for independent financial regulation, level of probity, finding out if there is a need for independent investment advisors and warning application forms.
Ayoola Fatona, another Leadway Assurance executive, who heads agric and micro insurance, who spoke on understanding pure risk transfer and insurance in the agri-tech funding space, said the agri-tech platforms crowdfund from investors by way of sponsoring a farm project with a promise of return on investment (ROI) over a period of time.
Fatona also revealed that the agric business value chain is very volatile with lots of challenges and concentrated risks; and it is at that point the insurance companies come into play.
“Insurable risks are those occurrences that have a direct impact on the farm assets and liabilities such as loss to crop harvest due to the natural flood, pests, windstorm, fire, theft or burglary, etc or the direct damage to agriculture produce while in transit from one location to another, among others. Pure risk in insurance is supposed to provide cover to assets which are out of farmer’s control and not the speculative risk policies, which the insurance firm does not cover. This is due to the inability to meet investment returns promised to crowd funders, the difficulty in offloading the produce due to disruption in supply and export value chains among others,” Fatona explained.
The head of agric and micro insurance at Leadway further stressed that there is the need to push for regulations, adding that the crowdfunding associations can get the nod to push for legislation and also create the operational standard to enable the protection of investors.
The virtual roundtable meeting also had in attendance Tunde Hassan-Odukale, the managing director, Leadway Assurance, who in a closing remark, said that the media are dependent upon to educate the public on proper investment activities. He also revealed that the company has been engaging with stakeholders on the focus of the company in educating and advising the general public.