Fantastic plan, zero response
Imagine you are a farmer and you have a fantastic plan: within six years you want to convert the farm to a "regenerative" farm, where you make your own cheese, grow Dutch tea, market your products in the neighborhood and also do agricultural nature management. Full of enthusiasm, you go to the bank for a loan; new plans require an investment and the barn also needs to be replaced. Unfortunately - you get zero response.
In the late 19th century, spurred by the industrial revolution, farmers needed better financial services. The "saving together principle" emerged and local cooperative lending banks were established. These banks offered farmers the opportunity to borrow money, spread risks, further develop their business and technology, and support each other. This was badly needed, because traditional banks were reluctant at the time to provide farmers with loans. Investing was too risky: harvests fell differently every year and trade agreements changed regularly.
After World War II, the position of farmers changed. Fertile polders, scaling-up and intensification brought economic prosperity. Farming became a good investment: good farming. Adjustments were made here and there, with milk quotas and manure rights, but the core remained intact: specialized businesses, high production and in many sectors mainly focused on export. Growth as a pillar, driven by a financial sector that knew what to do with it.
"The banks, including the farm loan bank of yesteryear, cannot come along by themselves."
No regard for environment
But growth in this form seems finite in the Netherlands, and has lost sight of the environment. The nitrogen file, farmer protests and stricter environmental regulations show: agriculture is in transition. Farmers are exploring nature-inclusive, regenerative and circular agriculture, give the beast a name. Farmers are also broadening their suite of environmental services, such as wildlife management, healthcare and recreation.
These forward-looking farmers are looking for a way to pay for the broadening and changing of their business model. But the banks, including the farm lending bank of yesteryear, can't automatically come along. Even now, that has to do with the difficulty of assessing the risk of these pioneering plans. In addition, a simple economics lesson teaches that extensification means less turnover at the bottom line, and banks are unable to calculate the added value of this - value for the environment - in their models. Thus, until the money tree is discovered, biodiversity will remain worthless to this group of financiers.
"Direct local residents, customers in the area, small suppliers, everyone who benefits from the change co-funds."
'Saving together principle'
Still, from our experience in the agricultural and financial sectors, we see perspective. The "saving together" principle has not lost its value. But it does require a different view of financing, for the farmer, the community and the traditional financier; the bank. Alternative providers, such as CrowdAboutNow, are stepping into the gap left by farm loan banks. Where the bank can't take the risk, through crowdfunding, farm entrepreneurs find the people who believe in their plan for change and are willing to make the investment, despite the risks. These are often people from the local area, who also - and not just financially - co-benefit from the implementation of the plan.
Direct neighbors, customers in the area, small suppliers, everyone who benefits from the change co-funds. This not only provides the farmer with funding, but also bonding with a group of people who are of value in a different way, who come to buy their vegetables on a weekly basis or can help think about progress. Not a farm loan bank, but a neighborhood loan bank.
New forms of financing
So is the role of, say, the largest surviving peasant lending bank completely played out? Certainly not. Rabobank's new director of Food&Agri recently revealed in an interview on Radio 1 that his bank is willing to take more risk to finance farmers' transition plans. A step in the right direction. We hereby call on banks to follow this example and look beyond the bank's length. By embracing new forms of financing, and by stepping in when the farmer knocks on the bank's door for an additional loan for his new barn with a nice amount of money from the community in hand, and thus a lower risk.
"The agricultural transition goes hand in hand with a funding transition."
About this article
This article was written by Mark Laagewaard (left here) of CrowdAboutNow and Joris Lohman (above), initiator of The New Farmer Family.
The New Farmer Family and CrowdAboutNow guide agricultural entrepreneurs to find the right path for their plans and work closely together in the Farmers Accelerator program. Plans from the agricultural vanguard are no guarantee of success, but continuing with agriculture in the same way will certainly create major problems in terms of biodiversity and the economy. The community plays an important role in engaging in the transition: for financing, testing support and connecting at the local level. Therefore, let's create plenty of space and collaborate on the financing issue. The agricultural transition goes hand in hand with a financing transition.