Access to finance is a serious challenge for smallholder farmers worldwide, and the majority of them are still underfinanced. When loans are provided, farmers may often pass these loans on to other people in need of cash. This, as well as the absence of a credit score or collateral (like title deeds), create uncertainty and risk for financial institutions and increases the difficulty for farmers to obtain such loans or other forms of finance.
Agri-wallet is a digital wallet, a mobile financial tool, for the agricultural sector providing a business account for farmers, which they can use to save, buy, and earn.
Farmers can open an Agri-wallet account for free. When farmers earn revenue through sales, they can choose to be paid in money through M-Pesa (a Kenyan mobile payment system) or (partly) in tokens for their wallet. Tokens are then earmarked for purchasing input supplies from merchants that have been vetted by Dodore, comparable to a voucher system. These tokens can be used to purchase inputs for the next cropping season. Furthermore, because credit takes the form of tokens rather than currency, lenders are more willing to provide farmers with loans.
As part of an ‘ecosystem’ with earmarked credit, Agri-wallet helps farmers to save and in turn enables them to access short term loans through Rabobank – without the conventional stack of paperwork. This kind of credit ecosystem is comparable to a voucher system, combined with a savings element. Currently 35% of the farmers who use the wallet, save.
Dodore has enlisted a number of partners to help finance the Agri-wallet venture, including Netherlands Development Orgnisation (SNV), the Mastercard fund, Rabobank Foundation, International Fertilizer Development Center, BoP Inc., Mennonite Economic Development Associates (MEDA) Agriterra, and Technoserve. “The financial partner was integral to getting Agri-wallet up and running”, explains Sijmen de Hoogh, who has founded Dodore in 2013. Dodore also works with a software company based in Poland, which processes the transactions and uses Ethereum (CTT coin) as a transaction engine (support for software developers).
“We use that to serve farmers, but you could also apply it to other sectors,” continues de Hoogh. Dodore spent one-year building Agri-wallet, before testing it in the second year and rolling it out to farmers in the third year. The app is currently used by 14 merchants such as input suppliers, 4,000 farmers, and 25 buyers. “It is difficult to convince famers to start saving and to solely use Agri-wallet. Trust is key – farmers are very wary of schemes, so in the beginning we did not approach farmers directly, but through the market. We would spend days with the first group of farmers. Fortunately, we have found better ways to explain them the concept and will contact farmers directly.”
Blockchain for the future
“We think that blockchain is disruptive, it can be replicated across countries without banks. We foresee many possibilities for ourselves to upscale without too much difficulties. Blockchain enables transparency and auditability in costs, but also for farmers where they can see what is going on with their produce. Although we do not see that interest that much yet, we see an increasing demand of consumers who would like to know where their products are sourced from for example.”
A word of advice
In Kenya, bitcoin is a very sensitive topic and implicates the broader area of blockchain: “In the beginning we would engage the different stakeholders with the overall story, which was very confusing. It would become difficult to get buyers engaged. So, we have simplified the concept. In Kenya, a ‘coin’ seems to have little value and ‘token’ is confusing, so we focus on the individual value propositions and on M-Pesa. Farmers are given access to a credit line, but if they don’t use it, it does not cost them anything”. Dodore’s advice is to avoid jargon, understand the customer and simplify where possible.
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.