When people ask me if they can invest in farmers through TJ, I try to explain that it's not easy to deliver returns like this. We're only now getting to the point where we can make farmers productive enough to walk away with a 20% profit after paying back their loans.

1/ https://twitter.com/ugodre/status/1314448053080920064

We effectively charge about 5% interest over the course of the season, and we're lending to the farmers against our own balance sheet. So, the overall profit of the farm is 25%. The farmer gets 20% and we get 5%.

If we took 3rd party money... the farmers profit would go down. 2/

Given how hard farming is, I don't think it's fair to cut a farmer's profits in half from 20% to 10%, especially if right now we still have a big enough balance sheet to do the lending ourselves.

Eventually, we might have to take on external funding to be able to make loans. 3/

It's also important to note that the only way we've been able to return a 20% profit to our farmers is because:
1) Our extension team works REALLY hard with them to improve their yields. On an almost daily basis.
2) We offer a fixed price as the offtaker.

And by the way, life as an offtaker of tomatoes is tough. Last year, we purchased tomatoes at a price of 38 naira/kg (farm gate). We didn't yet have our factory up and running, so we had to turn around and sell them to the market. The average price we received was 28 naira/kg.

We essentially had a negative operating margin on our business, even though our farmers were making money. Why did we do it? Because once we start processing, buying at 38 naira/kg will still enable us to make our finished product (tomato mix) with a decent margin.

As our farmers keep getting more and more productive, we will lower our purchase price. The eventual goal is for the farmers to make a 25% profit margin, and for TJ to make a 50% operating margin (which, after overheads etc. will translate into a 10% profit margin).

If there's enough room in the equation for the farmer to make a 25% profit margin, Tomato Jos to make a 10% profit margin, and a third-party lender to make a 10-20% profit margin, trust me, we'll be excited to offer this up! But we're just not there yet.

Final point: I don't think everyone offering farmer lending programs is fraudulent. I think there are some good folks out there, some naive folks out there, and some bad apples. But I really couldn't tell you who is who. I'm in the business of minding my own business.

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