Entrepreneurs in the agricultural sector and food chain in developing countries run all kinds of risks. Climate change, inadequate infrastructure or an unpredictable political situation can significantly affect their work. In the worst case, an entrepreneur you invest in could go bankrupt. With this in mind, we ask that you read carefully about the risks of investing in a company via PlusPlus.
Imagine...
You are an entrepreneur and you borrow money to buy, roast and grind coffee beans. You rent the necessary facilities and equipment and make down payments to farmers. Then comes a heat wave, which devastates the farmers' coffee crop. There goes your investment!
If the entrepreneur in which you invest goes bankrupt, there is a good chance that you will not get (a large part of) your money back. PlusPlus tries to limit the risks in all kinds of ways.
Spread your risks
AgriCrowd B.V. (with brand name PlusPlus) is registered with the Netherlands Authority for the Financial Markets (AFM) as a tied agent of investment firm Hands-on B.V. (with brand name Lendahand). This means that you invest through a reliable and well-regulated party. Nevertheless, there are risks associated with investing.
The AFM strongly advises you not to invest more than 10% of your freely investable capital through crowdfunding. It is also strongly recommended to spread funds over different projects and crowdfunding websites.
What could go wrong
Investing in small and medium-sized companies 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 a regular bank. That is why PlusPlus exists: these companies provide jobs and food security in places where it is desperately needed.
The risks arise from three sources:
- These are companies in developing countries that are generally more burdened by risks than wealthier states.
- Companies active in the agricultural sector and food chain are endangered by all kinds of specific risks that they cannot control. Such risks include unfavourable weather conditions or pest infestation.
- These are often relatively young companies that are more risky than mature companies with a longer track record.
In addition, there are a number of general risks that our local entrepreneurs may encounter:
- Credit risk: the local entrepreneur may have a bad credit rating
- Price risk: the price of goods may fall
- Competition risk: competitors may join the market
- Currency risk: very large fluctuations in the exchange rate can lead to serious financial consequences for the local entrepreneur
- Fraud risk: employees at the local entrepreneur may commit fraud
- Operational risks: a company unable to generate profits or break even
- Climate risks: unfavourable weather conditions
- Natural disasters and epidemics: can cause a variety of operational, logistical and financial problems
- Political and regulatory risks: changes in political climate or regulations can lead to many unforeseen difficulties for investors
Risk mitigation
PlusPlus tries to limit risks in various ways. We do this by:
- Keeping a finger on the pulse. The local offices of Solidaridad, Cordaid and Truvalu visit our entrepreneurs, offer guidance and provide training where necessary.
- Conducting extensive due diligence investigations into the expected cash flows of the local entrepreneur. PlusPlus always has its own due diligence carried out when an entrepreneur applies 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 for each project. This analysis does not provide a complete picture and serves simply as a tool for your own assessment and conclusion. Please note that PlusPlus does not offer investment advice.
- A compensation fund that can cover up to 50% of any investors' losses.
Loans are repaid semi-annually. It can happen that you have already received part of your investment back and that problems arise afterwards. If PlusPlus sees that a company is in difficulty, we will take action to limit the risks for you as an investor, or, if possible, help the entrepreneur get back on track.
Compensation fund
There is the possibility to get back up to 50% of your investment if the entrepreneur has gone bankrupt. The compensation fund is managed by the PlusPlus Capital Preservation Foundation.
If the entrepreneur in which you have invested cannot (fully) repay, you will be notified by e-mail. You can then submit an application to the compensation fund. The Fund’s Board will then determine if compensation can be paid in this instance. The minimum conditions for distribution are set out in the fund's articles of association. This concerns, among other things, the condition that the fund has a sufficient funding ratio. The compensation fund is made possible by financiers who believe in the impact that companies can achieve on PlusPlus, such as the Dutch Postcode Lottery.