Agricultural crowdfunding still lacks a key ingredient for wider adoption

Crowdfunding is a financial activity that has emerged in recent years for raising funds through the internet. It is a financing method in which fundraisers, in order to complete a specific project and achieve a specific goal, raise funds from numerous investors through an internet platform and give investors corresponding returns.

In July this year, the General Office of the People's Government of Guangdong Province issued the "Several Opinions of the People's Government of Guangdong Province on Financial Services Supporting Innovation-Driven Development," in order to accelerate Guangdong Province's financial reform and innovation and enable finance to better support innovation, the real economy, and opening-up and cooperation. The Opinions emphasized increasing financial support for the revitalization and development of eastern, western, and northern Guangdong, and specifically mentioned the need to actively promote the new "Internet + credit for agriculture, rural areas, and farmers" model, raising funds for innovative agricultural enterprises, farmers, and agricultural products through internet crowdfunding, and improving the financing efficiency of "agriculture, rural areas, and farmers."

Meizhou has been exploring the "Internet + credit for agriculture, rural areas, and farmers" model, including "agricultural crowdfunding," for more than a year. How has this model developed? What changes has it brought to our city's agriculture? What difficulties has it encountered?

　　a

[Current situation]

21 crowdfunding projects involve multiple types of agricultural and sideline products

In August 2015, the Meizhou Central Sub-branch of the People's Bank of China used monetary policy tools and the results of credit reporting system development to organize local government functional departments, financial institutions, and internet enterprises to participate jointly, and began building a new crowdfunding model of "Internet + credit for agriculture, rural areas, and farmers."

Data provided by the Meizhou Central Sub-branch of the People's Bank of China show that as of July 2016, Meizhou had successfully launched 21 projects through the crowdfunding model, attracting a total of 803 online investors, successfully raising 3.39 million yuan, with expected project output value of 11.38 million yuan. The agricultural projects launched involved various agricultural and sideline products such as honey, honey pomelo, kudzu root, lingzhi, and yellow rice wine.

In August last year, Lin Gansong, owner of Kecheng Farm in Baima Village, Jiaoling, became the first person in our province to try agricultural crowdfunding. A year has passed, and Kecheng Farm has also undergone great changes. When the reporter came to the farm, it happened that a distributor was hoping to order 30 tons of high-quality rice from him for OEM sales.

A year ago, Lin Gansong, who had contracted more than 700 mu of local land through land contracting rights transfer, introduced high-quality rice seeds from the Academy of Agricultural Sciences, adopted biological pest and weed control methods to develop green agricultural cultivation of ecological rice, and rehired local villagers to work on the farm.

Lin Gansong said, "The farm has 12 regular workers, and during busy farming seasons we need to hire more than 60 workers. Sometimes the funds on hand are very tight, and expanding the scale is even harder."

Over the past year, Lin Gansong successfully conducted three crowdfunding campaigns on the "Dianchou Finance" platform, raising a total of 850,000 yuan. At the same time, through a guarantee from Zhengqin Internet Finance Company, he obtained a 500,000 yuan credit loan from the local rural credit cooperative. All this money was used for the farm's operations and development.

Lin Gansong's farm plan has advanced steadily. The farm's regular rice planting area has increased to more than 1,200 mu, and rice sells for 8 yuan per jin. Kecheng Farm's fragrant rice has already made a name for itself in the industry. "This year's output has basically been ordered almost entirely, and I'm afraid there won't be enough, so I don't dare take more orders."

Because the supply and demand for rice has increased, nearby processing plants can no longer meet the farm's needs, and Lin Gansong urgently needs to add a rice processing segment. Pointing to a leveled vacant lot beside the base, he told the reporter, "Next, I want to build a rice processing and warehousing office area there to form a complete industrial chain."

The reporter learned that participating in financing through a crowdfunding platform currently requires paying two types of fees. One part belongs to the platform company, generally 5% of the financing target. The other part is the return promised to investors, generally at an annualized interest rate level of 10-20%.

　　b

[Difficulties]

Credit reporting and credit guarantee mechanisms for agricultural enterprises need improvement

The agricultural crowdfunding model has been operating for more than a year, and there are still some problems that urgently need to be solved in the promotion process.

The reporter visited some agricultural projects in need of funds and learned that crowdfunding's current ability to meet funding needs is still limited. "Based on our planting scale, financing is generally around 200,000 yuan. But for the entire project investment, this is only a drop in the bucket. We hope for larger agricultural support loans," a farmer growing honey pomelo told the reporter.

The financial companies participating in crowdfunding also seem to have encountered some obstacles. Zhao Xuesheng, project head of Dianchou.com, said, "Although Meizhou's agricultural crowdfunding projects have received a lot of support and help from the Meizhou Central Sub-branch of the People's Bank of China and the Agriculture Bureau over the past year, government supporting measures such as risk protection measures have not been put in place. As a crowdfunding platform, out of risk considerations, we do not dare to boldly increase quotas on a large scale." At present, apart from Jiaoling County having a certain foundation in its guarantee system, other counties are basically blank in terms of guarantees.

Liao Yaohui, general manager of Zhengqin Finance, believes that the credit reporting problem of agricultural enterprises restricts the promotion and replication of the business. If the local government could appropriately assume risks in supporting agricultural crowdfunding and improve the credit reporting system for farmers and agricultural enterprises accordingly, it would stimulate the development of agricultural crowdfunding.

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[Exploration]

Innovating guarantee mechanisms to resolve production-sales conflicts

Recently, Zhang Jin, secretary-general of the Guangdong Federation of Financial Consumer Rights Protection, disclosed that the "Guangdong 'Internet + Credit for Agriculture, Rural Areas, and Farmers' Crowdfunding Project Work Guidelines" have now been formulated and will be released at an appropriate time. Next, efforts will be made to establish a unified Guangdong provincial "Internet + credit for agriculture, rural areas, and farmers" agricultural platform, expand the scope of crowdfunding for high-quality agricultural products, and promote the implementation of inclusive finance. In the process of advancing this, the government and financial institutions are also making some explorations.

As a national demonstration site for comprehensive rural reform and a pilot county for inclusive rural finance in the province, Jiaoling County is at the forefront of building its "agriculture, rural areas, and farmers" financing guarantee system. This year, Jiaoling County took the lead in issuing the "Implementation Plan for Promoting the Accelerated Development of the 'Internet Crowdfunding + Credit for Agriculture, Rural Areas, and Farmers' Model," and established an "Internet Crowdfunding + Credit for Agriculture, Rural Areas, and Farmers" work leading group to advance the development of the entire model.

According to the provisions of the implementation plan, agricultural projects participating in crowdfunding will be selected through the following procedures. The Agriculture Bureau will screen high-quality agricultural projects; the People's Bank of China will conduct credit ratings on the entities of agricultural projects, include project entities meeting the assessment conditions in a financing entity cultivation pool, and recommend them to internet crowdfunding companies for reference; the government will provide village-level guarantee funds for project entities that obtain internet crowdfunding funds in the financing entity cultivation pool; internet crowdfunding companies will raise funds for agricultural project entities and share credit information with the Meizhou farmer credit information service system and other parties in a multi-party cooperative operating model.

In May this year, Dianchou Company signed a tripartite agreement with Zhaofu Village Committee and Zhaofu Distillery in Jiaoling County. With the village committee's guarantee fund as the guarantee basis, it successfully raised 100,000 yuan for Zhaofu Distillery on the Dianchou platform. This "internet crowdfunding + credit rating + village-level guarantee fund" financing model to support agriculture not only provides strong support for rural financial services, but also enhances the vitality of the agricultural crowdfunding model.

Recently, the Meizhou Municipal Agriculture Bureau also stated publicly that, in order to solve the difficulty and high cost of agricultural financing, this year it plans to issue a new "Management Measures for the Credit Risk Compensation Fund for New Agricultural Business Entities." On the basis of in-depth cooperation with Postal Savings Bank, Bank of China, Agricultural Bank of China, and others, the government will invest funds as a credit risk compensation fund, give priority to customers included in the key list for loan business at preferential interest rates, and compensate risk losses incurred by business entities' loans through the risk compensation fund according to agreement. Industry insiders believe that this move will also help advance the "Internet crowdfunding + credit for agriculture, rural areas, and farmers" project.

Chen Difan, Meizhou project supervisor of Dianchou.com, has been stationed in Meizhou specifically to promote the project since March this year. He said, "Among the 10 crowdfunding cases I have come into contact with now, most agricultural project owners hope for steady development. Therefore, their willingness to open up sales channels for their products is stronger than their willingness to seek financing."

At present, the upgrade and expansion of the internet finance model has already made explorations in resolving the production-sales conflict of agricultural products.

Liao Yaohui said, "Next, we will persist in making more innovations and explorations in internet support for agriculture, rural areas, and farmers, strengthen coordination with agriculture-related financial institutions and government departments, start by using the internet to solve the three major problems of production, sales, and financing for agricultural enterprises, and gradually extend to their upstream and downstream supply chains, thereby more flexibly meeting the financing needs of agriculture, rural areas, and farmers, reducing financing costs, and achieving controllable risks. At an appropriate time, combining consumer finance with agricultural e-commerce, we will try to open up the agricultural product consumer finance market, bring more agricultural products into cities, and make green and healthy agricultural products a consumption habit for urban people."

Zhao Xuesheng said that many agricultural enterprises and farmers still need time to accept this, and relevant departments need to issue corresponding measures to promote the e-commerce upgrade of "Internet + modern agriculture." "Dianchou.com's e-commerce platform has already been established and is solving the problem of fresh product circulation. At present, we are also using immersive virtual reality scenes (VR) to show agricultural products to investors, in order to enhance the sales competitiveness of Meizhou's agricultural products."

In order to help the broad masses of farmers understand and promote this new model of agricultural crowdfunding, and to support farmers' financing and agricultural product sales, in November last year, the Meizhou Central Sub-branch of the People's Bank of China, Meizhou Daily, the Municipal Finance Bureau, and the Municipal Agriculture Bureau jointly hosted the Fourth Kedu Wealth Forum and the "Internet + Credit for Agriculture, Rural Areas, and Farmers" promotion meeting, attracting several hundred participants including heads of agricultural enterprises (family farms) and related personnel, and farmer representatives. Professionals and crowdfunding platform representatives gave special lectures and had face-to-face exchanges and matchmaking with representatives of agricultural enterprises. Three agricultural projects in our city that launched crowdfunding on site all reached their targets that day, successfully raising 550,000 yuan.