How Blockchain Helps Smallholder Farmers in Developing Countries
Skeptics of new agricultural technology often ask, “how will this help the subsistence farmers that most need the help?”. This question has been asked of blockchain technology, and until this podcast interview, I did not have a good answer.
The app serves farmers by doing exactly the function blockchain was designed for: creating a permanent and tamper-proof ledger to build trust between various parties.
The results they are seeing in their pilot projects are staggering.
David describes pilot projects working with wheat farmers in Kenya and cocoa bean farmers in New Guinea.
The app allows farmers perform various transactions such as hiring custom seeders and harvesters, cooperating with other farmers for bargaining power, taking their crop to market and monitoring it through the production process, and more.
This ability to build trust with other farmers, vendors, and processors is life-changing for these farmers. In the two completed pilot projects, AgriLedger has been able to 3x farm income.
Making collaboration possible. Many of these farmers were not keeping records of their own farm. This makes collaboration with other farmers very difficult because it becomes impossible to track if everyone is contributing and collecting their fair share. However, with the independent source of truth that AgriLedger provides using the blockchain, the farmers can pool resources without worrying about if they are getting what they are owed.
Insuring payment. David shares the example of a farmer who would really benefit from having his wheat planted mechanically. Since he has less than five acres, it makes no sense for him to own this expensive equipment. He could hire someone to seed his crop mechanically, but he has no cash at the beginning of the growing season to do so. In the past, this has meant he has to seed the crop by hand. Not only is this less productive and less efficient, it also removes the option to mechanically harvest because it gets planted unevenly. By using AgriLedger, farmers can pool their small plots together to make it worth the time of a custom seeder, and they can insure payment to that custom seeder so that he or she is paid directly from the cooperative.
Capturing more value at the farm level. Imagine a farmer who has toiled for months and is finally at the point where they can collect an income from their harvest. Trust becomes extremely important at this stage, because they have one chance to convert their hard work into money. The way many farmers have dealt with this is to only deal with those who can provide them immediate cash on the spot. This significantly limits the number of potential buyers. In many cases, brokers take advantage of this by offering quick cash in exchange for cheap prices (think payday lending). Also, with a tool to collaborate, farmers can pool resources to create channels for storage, processing, etc. (see #1).
Automating record-keeping. I saw this problem firsthand when I spent a month in Liberia interviewing farmers: most do not keep records. But the few that do seem to be significantly better off than those that do not. This serves as a big step toward to treating a farm like a business and maximizing profitability. However, efforts to get subsistence farmers to adopt record-keeping as a habit are largely unsuccessful. By using AgriLedger for transactions such as inputs, labor, and selling the harvest, the basic records are kept for the farmer. I believe it will then become easier for the farmer to understand the value of these records to their long term profitability.
Reducing waste. David sites the example of green cocoa beans, which spoil quickly. In some cases, the harvest starts to rot before ever going to market. This is because the farmer is waiting for a buyer who can pay cash on the spot (see #3). Obviously, they are not paid for the part of the harvest that starts to spoil. By collaborating with other farmers and even processing the beans themselves, the farmer can reduce the amount of waste on their crop. Rather than just wanting money, they can track their crop through processing with the trust that they will get paid at the end.
AgUnity has plans in 2018 for 16 additional AgriLedger projects in 12 countries. These early results show exciting promise for the impact this technology could have on the developing world.