Malaysian bookkeeping & P2P microfinancing app for farmers
About the author : Payee Solutions
The local agriculture landscape is undoubtedly shifting towards adopting smart farming methods, be it in urban or rural areas.
But to become a successful agropreneur isn’t merely about finding the most efficient way of farming; one also needs to handle bookkeeping systematically and find the best way to finance expensive agritech.
Branding themselves as an agri-fintech startup, Kapitani is an early stage startup that focuses on empowering smallholder farmers through digital and financial inclusion. Their name is short for kapital untuk petani, which translates to capital for farmers—summing up their goals.
Kapitani is co-founded by Nazrul, Iskandar, and Hadi, who are the CEO, COO, and CTO of the company respectively. Nazrul was an engineer in the telecommunications industry, whereas Iskandar was one in Sime Darby Group and ZTE, and Hadi is a systems integrator specialist.
Helping smallholder farmers innovate
“Although most smallholder farmers understand that technology adoption will enhance profitability and efficiency, they’re living harvest to harvest without the excess capital that could fund the high upfront costs of high-tech farming systems and equipment,” the team shared with Vulcan Post.
While there are a lot of agriculture loans available in Malaysia with relatively low interest, farmers are still reluctant to borrow. The reason being the lack of financial data to make informed decisions on incorporating agritech.
“Our short-term goal is to assist smallholder farmers to build up a solid track record of their farms’ past business performance to forecast future growth potential,” they explained.
Should this work as planned, these data will give these farmers the confidence they need to make informed decisions just like any other businesses.
Such data is almost nonexistent to smallholder farmers as of now, because most of them don’t do any bookkeeping at all, and still run their farm the traditional way which is mixing personal income with farm revenue.
Starting from the basics
Because this is still an early-stage startup, Kapitani is still doing beta testing with a group of farmers, and it’s only available to Android users by invitation for now.
Essentially, this is how it works: once farmers have subscribed to their bookkeeping app, they’ll assist them in building a solid track record of their farm’s operations. What comes next will be showcasing their credit and investment worthiness to potential financiers.
Channeling public investment into the local agriculture sector will be done through a P2P microfinancing platform, which the Kapitani team is currently working on.
Dictionary Time: P2P (peer-to-peer) financing (quite similar to crowdfunding) enables individuals to obtain loans directly from other individuals, cutting out financial institutions as the middlemen. P2P financing sites usually have a wide range of interest rates based on the creditworthiness of the borrower.
The wide range of interest rates might appeal to farmers who are looking for better rates than banks can offer.
“The long-term goal for Kapitani is to connect farmers who want to seek affordable credit with Malaysians who want to invest in food farming via a simple and transparent way that also empowers local farmers,” the team simplified.
“But before we can do that, we need to ensure farmers are investable by quantifying the risk and return of the lending with a systematic record of historical data on farms’ operation (expenses, activity, production, and revenue).”
For Kapitani, the prerequisite for raising funds on their platform is that it can only be used for the adoption of agritech. Farmers do not need to put down any collateral as these are microloans.
Connecting lenders and beneficiaries
Besides seeing a need to empower local farmers with agritech, the Kapitani team also saw a surge in public interest to invest in agriculture.
This is due to demand for cash crops like chili, rock melon and cucumber which can be grown locally but are mostly imported for now.
“The opportunity to invest in these crops is limited for ordinary Malaysians due to its high entry barrier in terms of farming skills and experience, land requirements, and high initial capital investment,” they laid out the problem.
For lenders, they can access real-time farm data and farmers’ credit scores through the Kapitani app that also personalises profit-sharing and repayment terms based on the financial health and farm operation of individual farmers.
One risk the team did note though was that agriculture is the sector most affected by the risks of climate and natural disaster. Hence, they’re looking at options to mitigate these risks with crop insurance, and the premium would be shared by both farmers and the microfinanciers.
The Kapitani team also clarified that they want to position farmers and the public as partners instead of an investor-investee relationship, hence the ROI would be in the form of profit-sharing instead of interest.
“P2P microfinanciers would be able to connect with the farms they have funded and visit their farms, as this is an important way to build long-term trust and relationship.”
Giving love to Malaysian chilies and gingers
They currently have 100 smallholder farmers assisting them in testing their app, and most of them come from their partners which are Pertubuhan Peladang Kawasan Kuala Langat (PPK Kuala Langat), Pewaris Bumi Hijau, Sulaiman Plantations, and GM Peladang.
“Our users are mostly ginger and chili farmers. For the record, ginger and chili are the highest crops being imported, around 80% and 73% to serve Malaysia’s domestic consumption. This translates to around RM300 million worth of imports per year,” the team shared with Vulcan Post.
This is a huge opportunity for the smallholder farmers as this is an existing demand and supply gap in the local market. We just need to ensure that agritech adoption can assist local smallholder farmers in producing crops that can match the value, pricing, and quality of the imported ones.