At Fairfood, we identified nine ways in which blockchain technology can empower smallholder farmers. In a new blog series we will dive into these nine topics, looking at interesting use cases, reports and visionairs. In the third post, guest bloggers Chris Georgen and Gabriella Skoff (Topl) explore how blockchain can help smallholder farmers get access to finance. 

Blockchain technology has much to offer for the world of sustainability, profit-for-purpose and ethics. The power of blockchain is quickly outgrowing a narrow association with its first application of bitcoin and is increasingly developing a critical use-value in the impact space. Blockchains offer a unique tool, providing an infrastructure for anyone to transparently make and verify provable claims. As the impact sector blooms, this capability is of critical value for demonstrating that real, equitable impact—and not just a claim to it—is made. This is the bottom-line value of blockchains in the impact space, but it is only just the beginning.

Alternative credit systems powered by Blockchain
As new applications for blockchains arise, the transformative, cross-sectoral power this technology holds becomes ever clearer. One of the areas where blockchains hold immense promise is in shattering the constraints of complex, global supply-chains in the agri-food sector. These supply chains, often opaque and calcified, are not built to provide transparency for consumers nor opportunity for smallholder farmers. But in a world of shifting demands and technological capacities, things are changing, and a new era of sustainability, accountability and opportunity is taking hold in this sector.

Blockchain technology is helping to empower this revolution by making global agri-food supply chains more transparent, supplying consumers with verifiable information to make educated decisions about purchasing ethical products, and empowering smallholder farmers to move up the value-chain through access to alternative credit systems. While these first points have received broad focus in research and application, the last concept—alternative credit systems powered by blockchain—is a relatively novel but immensely powerful concept that we are only just beginning to explore.

Without access to finance, farmers must harvest and immediately sell their cacao locally, never able to even consider purchasing processing equipment or, let’s say, covering the cost of a confectioner producing chocolate on their behalf.

A major challenge in global supply chains is that most market power settles at the top of the chain, leaving those at the bottom with less access and control and fewer opportunities for their own growth and development. This problem is exemplified by the chocolate industry, where the average cacao farmer receives only 7 percent of the total value produced in their own value chain. That is because supply chains for chocolate production are long and complex, spanning several continents and involving a large diversity of actors.