It’s no secret that rural areas in Central and Eastern Europe are struggling. Low crop yields and a lack of financing are the main issues. But a Latvian start-up is aiming to change that.
LendSecured, a Latvian fintech start-up offering crowd-investing opportunities in real estate and agriculture is now looking at how it can bridge the small and medium farmer funding gap.
The gap is significant, according to the European Investment Bank, which estimates it at around 40 billion euros.
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“Everybody knows that people are leaving rural areas,” says Nikita Goncars, LandSecured’s CEO. “Young talented people are leaving, and one of the main reasons for that, and something we’re solving, is that there are no respectable working positions and no good paid work.”
This exodus, together with under-financing, may have additional consequences as the word’s population grows and demand for food increases. Goncars points out that there is no additional land to be found, so any increase in production has to come from already existing fields.
Yet with traditional banks underserving the small and medium farmer markets, those farmers cannot access the funds that they need in order to modernise and expand production.
Agriculture needs finance and innovation
“We know that countries like France and Germany have very high yields from one hectare. In Latvia and in Romania the results are far lower,” notes Goncars.
“To achieve these higher levels of harvest you need to use new machinery, new technology, innovation. You need younger people to stay and work and this is not possible without financing.”
The situation is similar across the region, according to Goncars.
“We looked at other European countries like, Bulgaria, Hungary, the Balkans, and we saw that it’s all the same. It’s highly under-financed so it’s really hard for small and medium farmers to get financing, so it ruins their production rates.”
In addressing this finance gap, Goncars explains that it’s a rare opportunity to use lending and financial know how to do something meaningful.
“We understood it’s a big problem which we can solve using our experience — this is a great possibility for us to work on something meaningful. In finance it’s hard to get something that can improve lives and you feel that you’re doing something important,” he says.
Bridging the gap
So what exactly what does LendSecured do? As Goncars explains, the start-up is not a bank, meaning it can offer more flexible terms.
“This is a more flexible solution for farmers, easier to receive because it’s from people to people. If something happens, there’s a bad season, we are not a bank — we can easily transfer this payment to next year and investors will happily wait,” he tells Emerging Europe.
Once a project is up and running on the website, interested members of the public can become investors by contributing sums as small as 50 euros.
Crowd-investing has already begun taking root in emerging Europe. Romanian SeedBlink is applying the idea to venture capital for start-ups. Estonia’s EvoEstate is doing the same for real estate projects.
Now, with the EU’s new crowdfunding regulations coming into force in November — companies like LendSecured can do business in the whole of the European Union.
“We’re working pretty straightforwardly,” explains Goncars.
“We talk to the farmer, estimate his needs — he needs so much money and can pay this amount, can repay this year or in three years — and we discuss the interest rates he’s able to pay. We estimate his percentage, we publish it on our platform and we take a fee for publishing it. Investors earn the interest from the farmer.”
In effect, LendSecured acts as an intermediary between those with extra funds to invest and those who need the funds to operate their farms.
“We don’t want to lend, we want to build this bridge between the big bags of money stored somewhere without usefulness and give an opportunity to people to improve their lives, improve their working conditions, and this is why we’re doing it,” Goncars concludes.
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