―Let me talk a bit about agriculture. Is there a general balance between productivity and cost?

Yes. After all, the reality of agriculture in Cambodia is that people do not spend money (invest) to increase productivity. It’s equivalent to not doing anything at all, so it’s not even agriculture in a real sense. For example, rice productivity in Cambodia is between 2.5t to 3t per hectare.

Vietnam has a rate of 6t and in Japan it is 8t per hectare. The average rate of 6t is not great comparing with global standards but the rates such as 2.5t is too low. The reason is that they don’t use proper seeds, they don’t use fertilizers and they don’t really take care of their fields and crops. If such facts were to be improved, it is not difficult to bring the productivity rate to 5t. Which is still lower than the average of our neighboring countries, but still it will double in productivity. And the cost to achieve such rates would not be double of the current costs. However, the idea of farmers in Cambodia is not to go ahead, if it is going to cost even one cent more than it is currently costing, this is simply because they do not have one more cent to spend.

―In India, is the service developed in the same way as Cambodia? Is there a unique difference?

The services being deployed are basically the same. India and Myanmar have a stronger impression of hierarchy in the villages. Cambodia’s hierarchy has been broken to pieces during the civil war. But, India and other countries continue to have generations of village chiefs for an example.

―In India, is mechanization in progress?

Mechanization has not progressed. For example, mechanization is more advanced in Cambodia than in India. India is still mostly cows cultivating the land and there are still very few tractors. Harvesters have been introduced for rice harvest in Cambodia and it is working quite well, but India still relies on manual work. I think that the reason is that there is a financing system progressing in Cambodia. 　However,,there is no competitive price for Cambodian crops and labor costs are not so cheap.

―You have various bases such as Hong Kong and India, but why are you mainly based in Phnom Penh, Cambodia? Can you also tell us about the outlook for the future?

I said that mechanization is more advanced in Cambodia, but India has advantages in insurance, and there is a system called Priority Lending, which is a system that a certain percentage of each bank’s loan portfolio should be lent to farmers, this has been introduced along with many policies. But the reality in India is that, such policies are not working properly. The reality is that it has advanced but has not reached all the way through to the end.

I think AGRIBUDDY’s work is to connect all the dots together and form a line, but Cambodia has no dots in the first place. There is nothing. The government does not have many programs for supporting rural farmers yet, and insurance products are custom made by us with Forte as local insurance company. I think that we will be able to take the essence of what we created in a country that has nothing, to other countries such as Myanmar or India.

As a business, Cambodia is still bigger than India. Various modifications have been made in Cambodia, and a system has been built, trial and error have been made, and the ones that I imagined in my head and the ones that we actually delivered are quite different. While adjusting such things, I will try to develop business in India without making the same mistakes. We are also planning to enter into Myanmar later this year.

I’m a foreigner and I can talk about many ideas, but I can’t really do anything on my own. I cannot talk to the farmers in the local language, nor can I lift their feelings. I just be able to go to meet them and smile. In other words, AGRIBUDDY cannot do anything without a local person who really believes and understands our concept of “We wish we could make a world like this”.

Our team in Cambodia is gradually coming together. This was not because I created the team, but they did. The same for India, and even if there are people who say, “I like it!” to my ideas, we can only make it happen if there are people who really form a team towards that goal. Under such circumstances, we finally found a person who will lead and build the team last year, India is finally at a stage where it has started to move. This will also be an issue when entering business in Myanmar. There are companies that will become partners, and there are people who are interested in investing in our business if we enter Myanmar. On the other hand, it is also required by farmers. However, It really would not work unless there is a passionate person who has the motivation to really change the rural life using the structure of AGRIBUDDY, a person who can actually act and lead. Nurturing the people and forming the teams will be the most important task.

（Interview and Photography　Ryoji Kawahara / Ryo Amasawa）

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―What was the reason for choosing Cambodia when trying to deploy your services?

I traveled through Southeast Asia around 2009, and I thought Cambodia was good at first. However, there was the possibility of making assumptions, so I decided to go around the rest of Southeast Asia. After going around SEA, I still thought that Cambodia was interesting, along with Myanmar. I thought Myanmar will grow if the military administration was to end, but I couldn’t imagine how long that would take. On the other hand, Cambodia has no military administration and no war. There was a great chance that the country would grow from here, and I decided to try something here. I always thought that I wanted to challenge myself in a place close to the post-war burnout field, and I thought that my business could also serve people.

The other was that I am an odd fellow and I wanted to do something that no one could challenge. There are many people in the real estate industry and travel industry who have success. Therefore, I decided to go to a place where no one goes to. Cambodia is an agricultural country, no one has starved to death here. They might be poor, but they have enough food. However, I felt that there was a lot of nonsense going on, even from my amateur eyes. I felt that if the farmers put more effort into their work, they would be more productive and be able to earn more. So, at the beginning, I decided to gather some money by myself and try to conduct the Japanese-style farming on a scale that cannot be done in Japan. I initially tried on 1000 hectares which is about the same size as Chuo-ku of Tokyo.

－How was the result of trying farming in Cambodia?

It was really difficult. 1000 hectares is really big when you stand on that area. If you think carefully, Tokyo Disneyland is about 50 hectares. When I am in the field, I cannot see at all where my field ends. Of course, I calculated how much production there would be from such area and all the costs involved, studying various statistics from the United Nations and the Cambodian government before starting the project. I asked many farmers too, and however I calculated it, farming would make a lot of money. I started the project from curiosity but… Well, the cost in reality was double, and the harvest amount was about half of all statistics and hearing we had gathered from the farmers. It ended with poor results.

I started thinking about why we got such results, eventually found out that even the data from the United Nations came from the same source. Which was a hearing-based research from the farmers. The data itself was unreliable, only based on interviews in rural areas, and the fact that people in rural areas were simply responding to what they heard from someone or what their mood was on the day. For example, the UN said that there were 60 million people in Myanmar, but the reality was that there were only 50 million, and they had made a mistake. If it was a miss count of 100 people, I could understand. But 10 million? You can imagine what it would be like for agricultural data. This means that the actual data in the rural area around the world is quite unpredictable.

And another was injustice and fraud. In Cambodia, there was a whole lot of frauds that I had heard of that happened to me. There were times when I was robbed by a group who came with a dump truck, and times that some parts from our tractor was taken hostage.

Back then, the salary was about 3 USD per person per day. I recruited people from nearby rural areas and employed between 700 to 1000 people. Obviously, the project was impossible to handle alone. So, I hired several managers. That resulted in salary per capita to increase. Moreover, the young people wanted to work in the city so only old people would gather.

From our point of view, we did not come to Cambodia to compete and defeat anyone, but we came here to nurture an affluent society with the Cambodian people. But, when the salary of local Cambodians increases, it became difficult to control the business. I began to think that it was wrong. In addition, I really should be mad if the work fell behind but with temperatures rising over 40 degrees and no shade in the fields, all the workers were doing their best. I cannot stand in the sun and work for an hour. So, with 3 USD a day becoming 6 USD a day, no one is really getting rich anyway, and one side would always be in pain. My thoughts of “things aren’t right” kept on growing deeper.

On the contrary, the fact that I had more money than the locals were the only reason that I could run a project on 1000 hectares of land. Apart from that, I didn’t introduce new innovation to Cambodia. And I thought to myself that this is not a business that I can be proud of as a Japanese. Only if we were aware of something, and that could be connected with a business model, that impact would be greater.

Since my background was in finance, I felt that if I could really know their reality and understand them, I could introduce financing in that area. I knew through experience of running a plantation that there was no money in the agricultural industry. So, I decided to shift the direction of our business from the operation of plantation to AGRIBUDDY. In that sense, AGRIBUDDY is a company that is based on the ideas that came from failure and my own pain.

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Go to Vol.3 →

AGRIBUDDY (web site) provides FinTech and Ag Tech services for farmers, mainly in Cambodia and India. The company has built a mechanism to use technology to collect and visualize data from farmers in developing countries while linking it with financial institutions. Because of this, the farmers have an environment in which they can easily obtain financing. The ultimate goal is to create a financial and insurance infrastructure to protect the lives of farmers in developing countries. We interviewed Mr. Kengo Kitaura (CEO), about the situation in Cambodia where AGRIBUDDY’s main focus is.

■A brief introduction of Kengo Kitaura
AGRIBUDDY Ltd. Chief Executive Officer. Born in Osaka in 1971 and currently lives in Cambodia. Upon graduating from junior high school, he moved to the US and studied at Western High School in Anaheim, California. After returning to Japan, he worked in consumer financing then he moved to Cambodia in 2010. AGRIBUDDY was established in January 2015.
※Bold letters：Interviewer　Photo from：AGRIBUDDY

－Almost ten years have passed since you came to Cambodia, how has the agricultural situation changed?

First of all, the number of cattle farmers have decreased. The number of tractors has increased instead.. Cambodia is becoming like a “financial paradise”, tractors and other machineries are also being sold through financing.

I think the situation stated above in Cambodia has its positives and negatives, but it is very important for the farmers to have an environment in which they can obtain reliable financing. There are various services in the world categorized in Ag Tech, but even if there is good technology and great fertilizer or other Agri-products, none of them can be used without the money to buy it, and technology cannot be introduced without the appropriate knowledge. Personally, I think the biggest problem is not the lack of goods and services, but the lack of money and ability (knowledge) to introduce them.

Whether it’s a tractor or a new machine, if farmers have the money to invest there, they can take as many as they want. That’s where the ideology of AGRIBUDDY comes from. The geniuses around the world are creating great tools and technology. But I wonder, “How do they sell it?”, I think we have to change the fact that “the buyers are too poor to buy such things”.

－It seems like AGRIBUDDY is a combination of Ag tech and Fintech. What challenges do you face while developing services for farmers in developing countries? It feels like that is also the motivation for AGRIBUDDY to expand its business.

Without finance, you cannot buy real estate, homes or cars. Furthermore, even mobile phones. In Japan, everyone uses an iPhone, but since they pay the mobile phone cost on top of their call charges, it is also a type of loan. Without finance, things really don’t progress.

To take out a loan, naturally the financial institutions have to know if the loan will be repaid. For example, if you live in Japan and work for Mitsubishi Corporation, it is easy to lend money. If you are 30 years old and single, it is quite easy to predict the salary. Withholding slips and pay slips will show a more detailed financial situation, and Mitsubishi corporation will never issue a false pay slip. Also, by asking where they live gives you an idea of the rent they pay, if they had bought the house it is easy to calculate how much they pay on mortgage. So, the lender can assess the borrower’s ability to repay a loan without much effort.

However, If you are in Southeast Asia, payroll statements may be fake, and no tax proof will be issued in many cases. If they are working at a company, you can imagine that “someone’s salary working in Phnom Penh would be about $300 per month.” But if you a farmer, there is no way of getting such information. If you asked the farmers directly, they would say “I made $5000 last year” or “I made $10,000 last year”, but that can be sales and not profit, we can’t assess if those figures are for real either. Under such circumstances, the lender has no way to assess their ability to repay the loan.

I always emphasize, that the “credibility” that financial institutions think and that of what the farmers think are fundamentally different. The credibility that farmers and people in general think is something like, “I have never lied,” or “I have not betrayed anyone,” or “I have been living here all these years” and “I know everyone around here.”. On the other hand, the credibility that a financial institution has in mind is all about “What ability do you have to repay?” There is a big gap here. We thought that if we could fill the gaps in between the two, farmers would be able to borrow money. And if farmers are able to borrow money, they will be able to buy necessary Agri-input or machinery that they could have never afforded without financing, and the productivity of agriculture will increase.

There are many products to sell, many things the farmers want to buy, and there are many institutions to lend money. But the reality is that such institutions cannot lend money to the farmers. So, the farmers cannot buy the essentials they need to perform decent agriculture, the manufacturer can’t sell to farmers because they have no money either, we started our business so we could eliminate such situations in between.

Go to Vol.2