Entrepreneurs in the agricultural sector and food chain in developing countries face all kinds of risks. Climate change, inadequate infrastructure or an unpredictable political situation can affect work significantly. In the worst case, an entrepreneur you invest in can go bankrupt. You should therefore read up on the risks involved in investing through PlusPlus.
You were an entrepreneur, borrowing money to buy, roast and grind coffee beans. You rent the necessary facilities and make down payments to farmers. Then a heat wave comes and largely destroys the farmers' coffee crop. There goes your investment!
If the entrepreneur you invest in goes bankrupt, there's a real chance you won't get (part of) your money back. PlusPlus tries to mitigate the risks in many ways.
Spread your risks
AgriCrowd B.V. (with brand name PlusPlus) is registered with the Authority Financial Markets (AFM) as a tied agent of investment firm Hands-on B.V. (with brand name Lendahand). This means that you are investing through a reliable and well-regulated party. Nevertheless, there are risks associated with investments.
The AFM strongly advises you not to invest more than 10% of your freely investable capital through crowdfunding. Spreading funds across different projects and crowdfunding websites is also strongly recommended.
What could happen
Investing in small and medium enterprises in the agricultural sector and food chain in developing countries is very risky compared to other investments. Partly because of this, it is difficult for these types of companies to get a loan from an ordinary bank. That is why PlusPlus exists: these companies provide jobs and food security in places where it is badly needed.
The risks arise from three factors:
1. They are companies in developing countries, which generally has more risk than investing in Western countries.
2. Businesses operating in the agricultural sector and food chain depend on all kinds of specific risks that you as a business owner cannot influence. Such as weather or pest infestations.
3. They are often relatively young companies that are more risky than more mature companies.
There are also some general risks that our local entrepreneurs might face:
Credit risk: the local entrepreneur may have a poor credit rating
Price risk: the price of goods can drop
Competition risk: competitors come in
Currency risk: large fluctuations in the exchange rate can lead to serious financial consequences for the local entrepreneur
Fraud risk: staff members at the local entrepreneur may commit fraud
Operational risks: the local entrepreneur might be unable to make a profit or break even
Climate risks: risks due to adverse weather conditions
Natural disasters and epidemics: can cause various operational, logistical and financial problems for local entrepreneurs
Political and regulatory risks: changes in politics or regulations can lead to unforeseen difficulties for investors such as not being able to withdraw their money
PlusPlus tries to mitigate risks in several ways. Among other things, we do this by:
Keeping a close eye. The local offices of Solidaridad, Cordaid and Truvalu visit the companies, offer local guidance and provide training.
Extensive due diligence on the entrepreneur's expected cash flows. PlusPlus always commissions its own due diligence when applying for funding. In addition, to provide more insight into an investment, we summarize our analysis in an investment overview that is published on our site with each project. However, the analysis does not give a complete picture and serves mainly as a tool for your own assessment and conclusion. So please note that this analysis is not investment advice.
Loans are repaid semi-annually. It can also happen that you have already gotten back part of your investment and problems arise after that. If PlusPlus sees that a company is having difficulties, we will act to see how we can turn the tide or reduce the risks for you as an investor.