Please I would like to know if its halal to invest in a crowd funding scheme. The company is called farmcrowdy. They are a agrictech company which crowd fund funds and share the profit among investors. They usually do a pre-incubation planing where they would have determine what is the likely profit and this is usually fixed. they also mention that should the farm fail you would not loose your investment as the farms are insured but you don’t get any gain on your investment.
Although I have browsed through the website, the relationship between the investor and farmer is unclear.
It seems like a Musharakah (partnership) where the capital provider is providing the farmer with funds and the farmer is contributing his land with a view to share profits from the harvest sales.
However, there are multiple requirements to ensure this is Shariah compliant which is not clear from the current website.
What requirements would be needed to make it shari’ah compliant?
The investor is protected against loss by insuring the farm. Meaning if there is a loss due to low price or a flood his capital is return from the insurance pay out.
This agreement outlines the terms and conditions (the “Terms”) between you (a “Sponsor”, “you”) and Farmcrowdy Limited (“Farmcrowdy”, the “Company”, “we”, or “us”) under which you agree to sponsor third party farmers to cultivate farm plots through our website (the “Platform”).
It is important that you read these Terms carefully. We strongly recommend that you seek independent advice when considering whether to sponsor a farmer with your money through the Platform.
We do not provide any advice, nor do we make any recommendations to you. The Company solely allows you to sponsor a farm applied for by farmers on the Platform. It is your responsibility to assess whether the Platform is suitable or appropriate for your needs and any decision made to use our Services is done so entirely at your own risk. Please be aware that execution of these Terms does not imply that we have confirmed that use of the Platform and our Services are suitable or appropriate for you. We advise you to consider whether sponsoring a farm through the Platform meets your required risk levels and objectives, and you should only commit such funds that you are able to financially bear the risk of losing considering your other financial commitments. By using the Platform, you confirm that you have the necessary experience and knowledge to understand the risks involved.
You confirm your agreement to these Terms either by registering as a sponsor on our website or by signing a copy of these Terms.
By continuing on our website, you agree to the following terms together with the Terms of Use, consent to our privacy policy, agree to transact business with us and receive communications relating to the sponsorship electronically.
2. LEGAL AND REGULATORY INFORMATION
Farmcrowdy Limited is a limited liability company registered in Nigeria (registration number RC 1358265 with its address at 2nd Floor, Plot 5A, Block 114, Akiogun Street (Oniru Market Road), Oniru, Lekki Phase1, Lagos, Nigeria
Farmcrowdy Limited is an agri-technology company providing innovative and digital solutions for its users to sponsor farmlands and for farmers to gain sponsorship to cultivate their farms.
3. SPONSORSHIP TERMS
The Sponsor will receive periodic updates on the status of the farm by email. The updates are also available on your profile on the Platform. You are expected to review all notifications, updates and reports from Farmcrowdy as they represent a record of information pertaining to your sponsorship contribution during a farming cycle
You are entitled to request for a physical visit to your sponsored farm, however, you must provide us with at least 14 days notice to schedule a visit
At the beginning of a farming cycle, you will be expected to pay costs related to the lease of land for farming, seedling/livestock, fertilizers, maintenance costs, and the cost of supervision and administration. All costs are included in your sponsorship contribution
You agree that by sponsoring a farm, your contribution is tied and unavailable for the entire duration of the farming cycle and neither Farmcrowdy nor the farmers can or will refund your contribution until the successful completion of a farming cycle
Any profits from a successful farming cycle of a Sponsor’s farm are remitted to the electronic wallet on the Platform when the produce is harvested and sold (i.e. upon completion of the farming cycle)
At the end of a successful farming cycle, you can decide whether to withdraw your funds from the electronic wallet on the Platform and transfer to a bank account you provide us with or to sponsor a farm for a new farming cycle
At the end of a farming cycle, any profits made during harvest will be shared between the Sponsor, the farmer and Farmcrowdy based on a pre-determined model unique to that farm cycle. This is done at the end of the stated tenure period for that farm cycle.
You acknowledge that you do not own any of the farms cultivated and are only entitled to the proceeds of any farming cycle you participate in.
4. SPONSOR REPRESENTATIONS AND WARRANTIES
Representations and warranties are statements and promises made by you to the Company, which we rely on as being accurate in our dealings with you. You make the following representations and warranties to us at the time of agreeing to these Terms and every time you use the Platform or Services, including the time you are matched to a Loan Agreement;
you are over the age of 21 years;
you are of sound mind and have the capacity to enter into these Terms and be matched to a farm;
all personal information that you provide about yourself is accurate and true to the best of your knowledge;
you hold a bank account in Nigeria in your own name and will use this account to transfer money to our account when you sponsor a farm and to receive refunds of contributions made and profits earned;
you have carefully considered the risks involved with using the Platform, the Services and being matched to a farm and also the risks associated with any form of cash contribution or donation, including but not limited to the possibility of losing all the money you contribute;
you will only ever sponsor with your own money unless you are authorised on behalf of a third party (“Third Party”) and we agree that you may act on behalf of that Third Party.
you are not using any illegal funds or attempting to launder by sponsoring a farm
if you are registering or accepting these Terms on behalf of a legal entity such as a company, trust or partnership, you are legally authorised to do so and we may request evidence of such legal entitlement (by way of a copy of any document which shows the valid and subsisting authorisation);and
you are not breaching any laws or regulations that are applicable to you or any company, trust or partnership upon whose instructions you are acting.
5. ACCESS AND USE
The Platform and Website is, at all times, subject to our Website Terms of Use.
Secure access to the Platform is provided by way of your username and password. These log-in credentials are unique to you and are the primary method of securely identifying you when delivering our Services to you. It is therefore extremely important that you keep your username and password secure at all times.
If you suspect that your secure access to the Platform has been compromised in any way, it is your responsibility to contact us.
You confirm that you will only use our Platform for the purposes set out in these Terms.
You confirm that you will not attempt to gain unauthorised access to the secure areas of the Website or Platform and furthermore you will not attempt to use code or software to manipulate or automate functions available on the Website.
You understand that we may store your IP address information and may monitor your use of the Website in accordance with our cookie policy.
Access to the Platform may be restricted at the discretion of the Company, particularly during periods of maintenance and updating.
We have the right not to act on your instructions including where we deem that your instruction was not sufficiently clear, or we could not verify your identity to our satisfaction, or the instruction was not made by you, or we believe that the instruction may be related to an illegal activity.
6. ANTI-MONEY LAUNDERING
Where we discover that the Platform is being used to launder money or for any suspicious transactions, we have an obligation to report your activities to the relevant authorities without recourse to you.
7. FOREIGN EXCHANGE RISK
Where a Sponsor contributes in a currency other than the Naira, foreign exchange gain or loss and fluctuations in currency rates may have an impact on the profit made on such contribution by the Sponsor.
All profits on contribution shall be converted and returned in Naira based on the Central Bank of Nigeria (CBN) official exchange rate. The Sponsor therefore enters into any transactions in currencies other than the Naira at their sole risk and shall bear all responsibilities for any gains or loss as a result.
Unexpected changes in currency exchange market conditions may have an impact on the extent of profit the Sponsor would be exposed to such as when there is an upward or downward movement in the relevant rates.
The Sponsor understands and is able to assume the risk of loss associated and agrees to be liable for any resulting deficit this might have on contributions made or profits earned.
8. TERM AND TERMINATION
Except as otherwise terminated in accordance with the provisions below, these Terms shall commence on the date you register to sponsor a farm with the Company and shall remain valid and binding for as long as you have outstanding sponsored farming cycles.
These Terms may be superseded by any amended Terms.
These Terms may be terminated by you provided that you have no outstanding sponsored farming cycle. Notice of termination must be provided in writing to [email protected]
These Terms may be terminated by the Company at any time without notice.
9. PRIVACY
You confirm that you have read and understood the Company’s Privacy Policy which provides information on how we use and store the personal information that you provide to us and you further acknowledge that the Company may amend and update this policy from time to time.
10. INDEMNITY
Subject to the Terms of Insurance and any insurance claims settled, you agree that the Company has no obligation to reimburse or indemnify you for any cost, loss or liability which you incur as a result of the failure of a farm to yield according to expectations
You agree to indemnify and hold harmless the Company, any farmer, and all our other agents or sub-contractors, against all liabilities, costs, expenses, damages and losses (including any direct, indirect or consequential losses, loss of profit, loss of reputation and all interest penalties and legal and other reasonable professional costs and expenses) suffered or incurred as a result of:
your fraudulent or illegal use of the Platform, the Services or the Website;
your negligence or any default by you of any of these Terms or the terms of any Loan Agreement to which you are matched;
any inaccurate or incomplete information that you have knowingly provided to us;
your allowing any other person to access your account either with your permission or as a result of your failure to keep your username and password private;
any service that you have offered, whether with or without our permission, to another third party using our Platform, Services or Website;
any claim made against you for actual or alleged infringement of the Company’s Intellectual Property Rights or any actual or alleged infringement of a third party’s Intellectual Property Rights arising out of or in connection with the Services or your use of the Platform
11. DISPUTE RESOLUTION
This Agreement shall be governed by the Laws of the Federal Republic of Nigeria. Any dispute arising out of this Agreement, which cannot be settled, by mutual agreement/negotiation within 30 days shall be referred to arbitration by a single arbitrator at the Lagos Court of Arbitration (“LCA”) and governed by the Arbitration and Conciliation Act, Cap A10, Laws of the Federal Republic of Nigeria.
The arbitrator shall be appointed by the Parties, where Parties are unable to agree on the choice of an arbitrator, the choice of arbitration shall be referred to the LCA.
The findings of the arbitrator and subsequent award shall be binding on the Parties and may be enforced through a Nigerian court of law. Each Party shall bear its cost in connection with the Arbitration.
12. APPLICABLE LAW
This Agreement shall be interpreted and governed by the laws in force in the Federal Republic of Nigeria. The Parties submit to Arbitration and waive any objections based upon venue.
13. CONTACT US
If you have any question regarding this Agreement, or comments about the Site or its contents should be directed to [email protected]
Jazakallahu khayran Rasheed for bringing this up here. I have reviewed FarmCrowdy and ThriveAgric for investment too. However, I wasn’t comfortable with the way their return is structured.
The main issues I saw(as far as I am aware - I am not a Mufti nor have I done any exhaustive review) are:
Fixed profit as a percentage of your investment. I would have preferred a fixed profit as a percentage of their Net Earnings. The latter represents a proportional share of the business performance and the amount may vary compared to the former which looks like interest payment with a fixed return.
The capital being insured (conventionally). Again, this looks like the investors are insulated from the business performance through a separate transaction entirely. I think the practice for Islamic institutions is to ensure that the business has sufficient assets to cover invested capital and avoid undue risk-taking while being transparent that capitals are at risk.