Technology use in agriculture is nothing new; applying the use of blockchain technology in agriculture is something new. In Nigeria, 80-95% of agriculture production(e.g. maize, rice, yam, tomatoes) is by small-scale farmers who cultivate land sizes of 2 hectares or less. These farmers are constrained in their ability to particularly access finance. FAO (2018) states that only 7% of small scale farmers in Nigeria can access finance. Other constraints include inadequate access to inputs, extension services, marketing and pricing information. All of this results in low farmer income, low food production, low quality food and wastage, food insecurity, among others.
So, wouldn’t it be great if there was a way to eliminate and/or significantly minimise these constraints? Contract farming is an approach currently used. Generally, an exporter/buyer comes to an agreement with a farmer on variables including quantity, quality, the timing of delivery, and price. The buyer may provide the farmer with seeds, finance, extension services, fertilisers, etc. This contract makes it easier for a farmer to access the market and have a fair idea of his income. On the other hand, there is evidence that in cases where the buyer does not provide finance, this contract does not make it easier for farmers to access finance from both bank and non-bank financial institutions. Financial institutions view agriculture as highly risky and have little to no trust in the ability of small-scale farmers to honour their financial obligations. Also, contract farming it is generally directed at export crops; and even that, only a small amount of farmers, about 10% are in contract farming worldwide. When it comes to food crops for the domestic market, contract farming is non-existent.
What other way is there to increase farmers access to finance and other inputs?
Using the blockchain technology – specifically permissioned blockchains, operated by persons and organisations in a given industry – you can have key stakeholders or participants in a particular supply/value chain on the same platform. They can read all information pertaining to land preparation, cultivation, processing, financing, storage, transportation, pricing and sale of agricultural produce. This creates a one-stop shop kind of service for all involved.
Agrikore, also known as an ‘e-wallet’ platform was developed by Cellulant in 2012. It is currently applying the blockchain technology in making available finance and inputs to small-scale farmers in Nigeria. Agrikore seeks to fill three gaps in agriculture; inadequate access to markets, inadequate access to finance and to provide a trusted environment for interactions. It describes itself as ‘a blockchain based smart-contracting, payments and marketplace system that ensures everyone in agriculture (farmers, FCMGs, agriculture input providers, produce aggregators, insurance companies, financial institutions, governments, development partners) can do business with each other in a trusted environment.’
How Agrikore works
The Agrikore blockchain seeks to make available information (e.g. price, markets), inputs, finance and produce to all stakeholders. It uses smart contracts to ensure the delivery of produce, loans, grants and subsidies. Three contracts are currently available; produce delivery process, agricultural loans, agricultural grants and subsidies.
Anyone looking to purchase a commodity places funds into the blockchain reserve. The funds are converted to the MULA, which is the trading currency on the Agrikore blockchain. When the terms of the contract are reached, the funds and product are transferred to the respective parties. The farmer is also able to redeem his MULA for fiat currency.
Inadequate or lack of trust is a key feature of the agriculture sector in African countries. Since the blockchain inherently builds trust, the Agrikore platform makes it easier for Know your Customer (KYC) processes. So when a bank gives a loan to a farmer, it knows exactly who the loan has been given to, terms are clear and others can tell that a loan at certain terms has already been made available to a particular farmer. Also, suppliers of agricultural inputs such as fertilisers and agro-chemicals can make these inputs available to farmers based on loan and produce agreements already in place. In the same way, governments and development partners can make available agricultural grants and subsidies to farmers because they’re clearly identified with respect to their identity, locality and crop produced.
In Nigeria, it is used for the Growth Enhancement Support Scheme and supported by the Federal Government of Nigeria, The World Bank, African Development Bank (ADB), Dangote Group, among others. A report by Cellulant in 2017 indicated that in the 2016 GES dry season, it succeeded in making available inputs (seeds, fertilisers) to over 450,000 farmers in four value chains; rice, wheat, groundnut and corn. Out of that number, 383,636 were rice farmers who produced enough to feed 120,000 Nigerians for two months. Agrikore also succeeded in financing 660,112 farmers. In 2017, financial institutions joined the platform with a US$10 million loan portfolio, aiming to finance 1,736,445 farmers by July 2018.
Agrikore is also operational in Liberia while Malawi and Togo are looking to apply it.
The Agrikore blockchain seems to have made inroads into agriculture finance and input supply, key aspects for a successful agriculture sector. Agrikore itself notes that the use of its blockchain strengthens evidence-based public policy. Currently, this evidence is provided by the developer itself. Allowing third party access to review the evidence would further strengthen the use case of the platform and public policy. Across Africa, there are a number of challenges including farmer education, initial capital costs, scalability and network issues, which must be addressed to ensure that a platform like Agrikore makes the fullest impact.
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