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Transforming subsistence farmers into market-connected entrepreneurs

Chris Mimm

Chris Mimm explains how Farmshine is attempting to rebuild the value chain infrastructure in East Africa. Farmshine connects actors in the value chain on a fully transparent blockchain platform, providing them with a digital identity and fully traceable record of transactions.

In many developing world countries, the agriculture value chain is aligned with smallholder farmers. Access to credit, inputs and trade is largely controlled by middlemen, who extract a disproportionate amount of income while providing little value in return. They charge exorbitant interest rates on small loans, horde the limited market information to which they have access, and offer farmers below-market prices for their crops.

Large commodities buyers are likewise affected by value chain inefficiencies. Because they lack a direct connection with individual farmers, many buyers are unable to influence which crops the farmers plant in a given season. In East Africa alone, this disconnect results in hundreds of thousands of tonnes of unmet demand for commodities each year. Similarly, seed producers have little indication of which crops smallholder farmers will plant in the coming seasons, resulting in seed shortages for those crops in highest demand.

Trust

In order to connect and align the interests of each actor in the value chain, such as farmers, buyers, banks, seed suppliers and other service providers, the value chain infrastructure must be redesigned for the modern economy. The price that buyers will pay for a crop should be conveyed before the planting season, directly from the buyer to the farmer. Loans and other services should be offered to farmers with complete transparency. And farmers should become entrepreneurs – market-connected traders who can choose which service provider or buyer to work with based on their reputation and history of trade.

The essential component of this improved infrastructure is trust. Farmers must trust that buyers will pay them the agreed price, and buyers must trust that farmers will grow the quantity and quality of crops they require. Likewise, banks must have confidence that individual farmers are creditworthy, and farmers must believe that the crop insurance they purchase will pay out following the occurrence of drought or flooding.

Based on the above ideals, Farmshine is rebuilding the value chain infrastructure in East Africa. We connect each actor in the value chain on a fully transparent platform, beginning with the farmers, who are provided with a digital identity and fully traceable record of transactions. Each activity is recorded, including the quantity and quality of the crops delivered at harvest as well as the successful repayment of loans. Much like a CV or credit score, this enables farmers to build a reputation among buyers and service providers, and thereby increase their access to better market opportunities.

Our strategy is to identify each broken link in the agriculture supply chain – the points where smallholder farmers are underserved or even exploited – and replace them with beneficial processes and service providers. Without such a comprehensive solution, farmers are unlikely to escape from the middlemen or, ultimately, from the cycle of poverty perpetuated by the current system.

Recording activities on the blockchain

The activities of each actor are recorded on an underlying blockchain layer, providing a traceable history of the entire value chain. In this way, accountability is built into the platform. The reputation score of each actor signifies their reliability to potential clients or suppliers, and builds trust among unknown parties. We also use blockchain technology to record the provenance and physical condition of crops after harvest. As crops are aggregated in the field, each bag is given a QR code, which is scanned at a series of checkpoints. The weight, quantity, humidity and other information is recorded on the blockchain. This provides the buyer with a comprehensive record of each harvest, while enabling farmers to establish their reputations as reliable suppliers.

Although we believe this model represents the future of the agriculture value chain, technology can solve only part of the problem. In order to optimise the quality and quantity of farmers’ production, field agents are needed to provide support, such as training in conservation agriculture. To this end, we employ our own agents while also partnering with NGOs and UN organisations. These partnerships are mutually beneficial, as development agencies generally provide training to farmers but do not connect them with buyers. Moreover, their projects are finite and often lack a sustainability component. By connecting farmers to our platform, development agencies can provide their farmers with sustainable trading opportunities among trusted value chain actors.

By providing farmers with a digital identity, traceable production history and direct access to buyers and service providers, our platform helps to transform subsistence farmers into market-connected traders. This transition is the essence of sustainable development.

Copyright © 2016, CTA. Technical Centre for Rural and Agricultural Cooperation

CTA is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). CTA operates under the framework of the Cotonou Agreement and is funded by the EU.