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The building blocks for better value chains

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The UN reports that around 50% of crop value vanishes between harvesting and the point of sale. AgUnity – an Australian agri-tech start-up established in 2016 – aims to address this issue in Kenya, Papua New Guinea and Ethiopia with the help of blockchain technology.

Working with farmer cooperatives, the company AgUnity has developed a mobile application that records the relevant data – from commodity prices to a delivery’s place of origin – for all transactions along the value chain. As the AgUnity team continues to grow, they give us some insight into the emerging field of blockchain technology, and what this might herald for agricultural sectors, and development more broadly, across ACP countries.

The challenge: Trust in cooperatives

For many developing countries, agriculture plays a key role in economic development. However, more than one billion smallholders still earn little and often lack the capacity to increase their incomes – with better and more inputs, or training, for example. Angus Rama Keck, chief of staff at AgUnity, explains that, “Globally, hundreds of millions of smallholder farmers live on a few dollars a day. One of the most equitable and efficient solutions is to have farmers organise into farming cooperatives as they allow for better market prices, access to farming equipment, and harnessing economies of scale.” Cooperatives are promoted by the likes of the UN Food and Agriculture Organization (FAO) and the World Bank, and are set up with the help of NGOs including the Gates Foundation and Deutsche Gesellschaft für Internationale Zusammenarbeit. AgUnity found that many organisations were already working on setting up cooperatives, however there was a consistent barrier to these efforts. As Angus puts it, “if this is the best solution, then what is going wrong?”

The answer is: a lack of trust. “Most cooperatives rely on paper-based record keeping. With many low-income farmers having low levels of literacy, and living in areas with very ineffective or non-existent governance structures, power imbalances emerge and there is huge potential for corruption and graft.” One such example is where a cooperative and a farmer disagree on the amount of produce a farmer has delivered when they arrive to be paid. These types of disputes often lead to farmer disengagement and/or leaving the cooperative altogether. Angus recounts examples where entire NGO projects setting up cooperatives have collapsed due to ongoing farmer disputes.

The solution: Immutable record keeping

AgUnity enables the restoration of trust between smallholder farmers and farming cooperatives by recording transactions via blockchain technology. Angus calls it a ‘digital handshake’ between a farmer and cooperative, which no entity (including AgUnity) can alter. When farmers and cooperatives trust each other and collaborate, they see a substantial increase in efficiency and a dramatic increase in their income. “Farmers were willing to participate in a cooperative when they believe they are not more likely to be cheated compared to anyone else.” AgUnity started with projects in Kenya and Papua New Guinea where, on average, the technology led to a threefold increase in income during one season. The technology enables agreements on amounts delivered and facilitates the sharing of equipment (such as a tractor or combine harvester). Following the successful initial trials, AgUnity has launched similar projects in Indonesia and Ethiopia, and continues its work in Papua New Guinea.

The AgUnity App

The AgUnity App is a blockchain-based smartphone app which lets farmers schedule various farming activities – such as sharing farming equipment, and recording transactions when buying and selling with cooperatives and other third parties, as well as managing their incomes using the in-built digital wallet. AgUnity is also in the process of facilitating access to micro-loan services from their online ‘Marketplace’ within the app.

Implementation

AgUnity initially took part in an accelerator programme, SproutX, which helped the company improve internal strategies, marketing and business development, as well as connecting them with a wide network of investors.

For the technology, AgUnity placed particular emphasis on the stability and security of the platform, and on their familiarity with the programming language. MultiChain was selected – an open-source blockchain platform. “Cost and speed are also relevant. We’re looking at migrating our blockchain platform to an enterprise solution such as NEM or similar. The main reasons are that it has a lot of functionality allowing for flexibility. NEM is also built for scalability and speed, and it has low energy costs compared to Bitcoin. NEM is a public blockchain, but also has the option for a private blockchain too. Public blockchains are great for cryptocurrencies, however some organisations need to keep their users’ data private, so opt for either a private or combination private-public blockchain.”

Parting advice

From a technical perspective you should take time to find the blockchain you feel is the best fit. It can help to engage with people behind the technology, the Telegram app is a great way to do this quickly and directly. You can simply ask them if your use case and idea would be a good fit, usually the feedback circuit is fast and short.

“Do your research, don’t be afraid to have a few conversations and make sure you have a good development team which understands and can build good quality blockchain tech.”

This article is one of a series of case studies on blockchain applications in agriculture undertaken by Wageningen University and Research on behalf of CTA. See the rest of the collection at https://www.cta.int/en/blockchain.

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