Crowdfunding an option for agriculture

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According to reports, New Zealand's primary sector has significant capacity for growth, in terms of value if not production.

However, a future funding gap may hamper that growth. New financial tools such as crowdfunding could help.

ASB and ANZ banks have predicted a growing need for capital in the agricultural sector; $65-70 billion over the next 10 years, increasing to $210 billion by 2050.

Meanwhile, the Government aims to nearly double the value of exports from the primary sector by 2025. Adequate finance is essential to support this growth. Among the options may be greater use of crowdfunding.

Crowdfunding involves large numbers of people who each invest a small amount of money in a business. A universal element is the use of internet technology, to reach many potential investors cheaply and easily.

Internationally, the amount invested via crowdfunding has risen sharply, from US2.7 billion in 2012 to more than US$5 billion in 2013. Seeing it as a valuable aid to economic development, governments in the EU, the US and now New Zealand have legislated to encourage crowdfunding. Australia is looking to follow.

From April 2014, a law change allows Kiwi entrepreneurs to sell shares to the public and borrow up to $2m a year via licensed crowdfunding and peer-to-peer lending platforms. All without having to produce a formal prospectus, which in the past has proved prohibitively expensive for smaller businesses. These changes are expected to produce a rapid increase in the number of people using crowdfunding.

Crowdfunding began with the creative and technological industries.

The primary sector has been slow to adopt it, but this may be changing internationally. In Britain, individual businesses are using it to finance farm purchases or expansion into international markets. In the US, one crowdfunding group invested more than US$30m in the food and farm sector over the past three years.

It remains to be seen if New Zealand agriculture is ready to embrace crowdfunding. Federated Farmers works to support a strong, dynamic primary sector and will be watching developments with interest.