Blockchain in agriculture

Optimising supply chain efficiency and building trust

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By Antony Mutunga

As far as history dates, agriculture has propped up Africa’s economy – where the majority of its people lead rural, agrarian lives – in a way other sectors haven’t. In fact, the sector is the largest contributor to the continent’s gross domestic product – at 15 percent, according to the OECD (Organization of Economic Cooperation and Development)-FAO (Food and Agriculture Organization of the UN) Agricultural Outlook 2016-2025. The continent has vast tracts of arable land, most of them unfarmed.

Tropical climates, which bring about long growing seasons, and a growing population that both provides a massive young labour force and a readily available market, makes Africa every farm lover’s dream. But, this is where the good tidings end. The continent has been unable to harness these opportunities fully. Since the 1980s, productivity has stagnated, even decreased in some respects. The continent produces little food and food products which are not sufficient for the needs of its ever-growing population, which has worked in favour of imports.

For instance, according to FAO, in the 1980s, African agricultural imports and exports to and from the world were balanced at Sh1.44 trillion ($14billion). This had changed by 2007 when the imports exceeded the exports by about Sh2.26 trillion ($22billion). Experts attribute low productivity to a lack of access to funds, market and land, a reliance on physical labour and rapid urbanisation.

There is some welcome news: the emergence of the blockchain technology, which promises Africa the chance to reach its potential in terms of the agricultural productivity. Many tend to associate this technology with cryptocurrency, but the truth is it is capable of so much more! Blockchain technology, which is a secure distributed ledger that contains shared stores of information, can afford agricultural processes transparency, accountability, traceability and financial assistance, to increase productivity and access markets.

For instance, one of the major challenges African farmers face is access to finance – largely because they are unbanked. While digital channels, such as mobile money services are slowly changing this, there are still many challenges that need to be tackled in order to attain proper financial access.

According to the 2017 Global Findex database, about 1.7 billion of the world’s adults remain unbanked – either through conventional bank accounts at a financial institution or through a mobile money provider. The report also states that the majority of those in this segment are developing countries. This is especially true for the people living in rural areas. With most farmers living in these areas; they have been affected and thus find it difficult to access credit. In fact, according to Findex, approximately only 1 percent of banking lending goes to the agricultural sector in Africa.

Today, thanks to the integration of blockchain technology in the sector, things are changing. Doing away with identified issues, such as a lack of identity management, contract administration and enforcement, blockchain technology presents users with a decentralised platform that allows them to build a reliable identity and transaction history that will increase their access to finance.

As a result, small-holder farmers can have to the funds they require to increase productivity.

An example of just how well blockchain can be applied to transform business systems is the partnership between IBM and Twiga Foods in Kenya, to help food vendors to access micro-lending options. The data from Twiga Foods, a mobile based business to business supply platform, is used by IBM to assess the creditworthiness of an individual; from here on, blockchain applications handle the rest of the lending process.

Apart from a lack of access to finance, the sector also faces a problem in supply chains. Hitherto, a lack of transparency in the chain brought about distrust among the players, the net effect being that many farmers had to rely on themselves in finding markets for their products, which was supremely ineffective. Often, the more perishable products went bad, resulting in huge losses.

In proffering a solution, blockchain technology will provide all players with information on the products from the time they leave the farm to when they reach the consumer, enabling them trace their products in real time. This will not only faster trust in the chain, but also enable consumers to know where the products they consume originate. Blockchain will also assist in fair pricing by giving farmers access to prior transactions of the same product by charting pricing history.

An example of how the blockchain technology is already ensuring transparency and promoting trust in the sector is through AgirLedger, which also applies blockchain technology to help farmers keep digitised, incorruptible records and show proof of income.

The application which was recently piloted in Kenya gives farmers the ability to handle various processes such as collaborating with other farmers for bargaining power, monitoring the production process and taking their crops to the market. Apart from building trust in the supply chain, the platform has also increased the incomes of the participating farmers threefold.

Where farmers have experienced challenges in facilitating payments, the introduction of smart, self-executing contracts, whereby the terms of agreement between parties is written into a code that is contained in a blockchain network, this could soon be a thing of the past. Smart contracts promise to streamline such processes thereby reducing the costs.

Africa has the potential to feed the entire world and become a major food exporter. To achieve this, however, we must be willing to integrate technology in agricultural processes to assist farmers acquire greater returns for all their hard work. Blockchain is a good place to start to ensure trust and transparency in the sector so that more and more people can take up farming.

Agriculture is the driving engine out of poverty for most people in Africa, and the best way to help them actualise their dreams is by giving them a platform no one can sabotage.

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