Harvest Work

The Solution

  • Farmer Centric Value Chain Network
  • Strengthening Farmer Collectives
  • Technology Enabled Solutions

Applying blockchain to agriculture

The simplest way to visualize blockchain is one big digital ledger available in the cloud platform accessible to all the parties in a secure, transparent, trusted and audit-ready way. The ledger forms the basis of all financial and non-financial assets related transactions. 

Imagine the possibility of having one universal ledger that is shared across all parties in the agricultural value chain. Any entry made in the ledger is authenticated by all parties and the same copy of information is available to all based on their respective roles/authority. This ledger then becomes the fingerprint of the agri value chain with increased traceability, providing a single source of truth to all players. The digital ledger is written based on the
consensus from all and cannot be tampered by anyone due to a strong cryptography based method of writing the data. The digital ledger is completely auditable at any point of time and provides a final source of facts that cannot be challenged.

Blockchain Technology can integrate and control all activities and transactions in Agricultural supply chains on a real-time basis. Users can add transaction data and
product attributes to all the transactions executed on the distributed ledger. As the product moves from the farmers to the retailers, it can be tracked throughout the agricultural supply chain.

The majority of the small and marginal farmers in India hold small and fragmented lands because of India’s inheritance laws. More and more land holdings become smaller with each passing generation. Farming on fragmented lands reduces the agricultural productivity,
increases the time and labour involved in agri activities. It also drains out the farmer’s financial health by making it resource extensive.

The only way out of this problem is the consolidation of farm land/resources by bringing together group of farmers
with the same thought of improving the farming area or sharing the farm resources and reaping the maximum benefits.

 

Farmer inclusion happens through trustworthy identities that gets shared across Agri players.

The digital ledger enables asset request, verification, approval, disbursement, usage and repayment in real-time making it convenient for all the players. It helps reduce the cost of
borrowing for the farmer or farmer groups; improves productivity; and increases the market participation. As a result, it helps increase the contribution of agricultural activity towards GDP.

The Problem

  • Low farmer productivity
  • No bargaining power
  • Limited resources

Agriculture in India highly
unorganized

Agriculture in India continues to be
plagued by low productivity of farmers
due to excessively high cost of credit and no bargaining power. Market dynamics are unfavourably imbalanced., with the existence of a multiplicity of intermediaries that raise costs without much value addition. This leaves none of the excess margins for the farmers who produced the output.

Furthermore, anti-private-sector
legislation, controlled prices, insufficient
infrastructure and lack of appropriate
research results in an agricultural sector
that is highly unorganized and highly
inefficient.

Low Assets leads to low productivity

In India, two-thirds of the population is
extremely poor, with 68.8% of the population
living on less than $2 a day. Studies
indicate that more than 20 % of Indian
farmers are under the poverty line. Further, the
rising pressure of the population is felt on on
farming and land assets, leaving the average farm size in India at 1.15 hectare. Since 1970-71,
there has been a steady declining trend in
land holdings, and this
predominance of small operational
holdings is a major limitation to reaping
the benefits of economies of scale.

Low bargaining power and High cost of borrowing

Since small and marginal farmers have little
marketable surplus, they are left with low
bargaining power and no say over prices. Further they do not have sufficient collateral
to secure credit at a reasonable rate. From
the lender’s perspective there is a
significant risk of default and is extremely hard to estimate future cash flows due to
natural volatility and market inefficiencies.
Due to lack of transparency and the
monitoring costs of asset tracing, the only
choice lenders are left with is to increase
the cost of borrowing for farmers which
drives them towards informal credit. This
leaves them financially much worse off,
exposing them to the risk of external
threats.

FARMER

High Costs + Low Bargaining Power

Low Farmer Productivity/Output

Barriers to market access, low profits

Higher Cost of Borrowing

Higher
default risk

Borrowing farmer lacks collateral

LENDER