This is the fundamental level of FinComEco’s involvement that sets up a virtuous circle, which helps the farmer to increase his business:
Via FinComEco, the farmer receives current price updates on his mobile phone
Any surplus of crop is taken to a local FinComEco warehouse
Through FinComEco’s mobile banking tool the farmer is paid immediately on his mobile phone
He then uses the money for more land, seed, fertiliser, etc.
Thus he can provide more surplus food next harvest.
As a result of the FinComEco model the farmer is given access to a wider market for their crops as it works to bring small dealers into the Ecosystem. The technology behind the initiative is able to identify and track the farmer and his crop. As part of their involvement in the program, FinComEco will arrange for the farmer to be given free banking up to a certain number of transactions per year. Gradually, farmers can be offered low-cost loans for fertiliser, seed, tractors, land, etc. as an alternative to the clutches of local moneylenders and small-scale dealers in crops. FinComEco will supply the mobile banking used by the farmer and also give access to market-price details of crops on his phone. Eventually, after experience and education, the farmer can sell his crop forward or hedge his prices with futures.
Delivering an agricultural exchange
This is the middle tier of FinComEco’s involvement. It sets up a virtuous circle which ties the farmer into a growing agri-economy:
The local commodity exchange becomes the centre of a growing agri-economy underpinned by electronic warehouse receipts
More and diverse products are brought to the warehouse and sold on-exchange (peas, grains, vegetables, etc.)
Factories arise and expand because of local supplies. (E.g. tomato paste instead of just tomatoes)
The logistics industry grows shipping finished goods and bulk grains, which…
…helps the farmer by reducing the costs of transportation
The Banks expand and loans and trade finance are provided to; Farmers, Dealers, Agri-businesses and Logistics companies
Some of the benefits for the Exchange as a result of successful implementation of this financial infrastructure include: electronic warehouse receipts are more easily validated and financed; banks gain large numbers of smallholder farmer customers which will gradually turn into local businesses; growth in other financial areas such as insurance; and improved tax revenues to support government investment in infrastructure.
As the farmers and dealers become more sophisticated the exchange leveraging the aggregated services FinComEco will provide can offer:
Forward sale contracts to the farmer to get money in advance
Futures contracts (on a very small lot size) to allow the farmer and dealers to hedge prices
The use of derivative contracts will stimulate trading and price discovery in all commodities traded
The growth in agri-businesses will create new commodities to trade and businesses to list on the local stock exchanges. The increase in food surpluses and agri-products leads to the opportunity for exports and reduction in imports.
Supporting country growth
This is the top tier of FinComEco’s in-country involvement. It sets up a virtuous circle which deepens and grows the financial economy (banking and markets):
Banking grows in importance within the economy
Loans and trade finance are provided to:
More people can trade on exchange
Growth in hedging, forward planning and speculation
This tier of the FinComEco model illustrates the ecosystem where the markets of one country are linked to strengthen and deepen them. FinComEco operates a single derivatives exchange as well as a CCP Clearing house by which local regulators from each individual country control access and use. As a result the exchanges begin to facilitate trade between themselves and each other’s commodities and derivatives, which then further stimulates trade on an international level. The increasing use of exchanges encourages growth into other commodities and instruments.
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