Securing incomes through smart farming and traceability
To explore the potential of block chain for establishing sustainable agricultural supply chains and improving financial security, a new project enables smallholders in India to use the technology to document that they are producing cotton and peanuts sustainably. In cooperation with project partners WRMS and dCentra, the project records data on farming practices. This makes it possible to increase farmers’ incomes and also better protect their livelihoods from risks such as extreme weather events, as the more reliable data pool improves insurance models.
A lack of transparency in agricultural supply chains and insufficient access to financial services represent major issues for Indian smallholders. Due to information asymmetries within the supply chain, there are often no economic incentives for smallholders to employ sustainable practices. They frequently also lack access to financial products, which in turn means they are insufficiently insured against agricultural risks such as extreme weather events.
Access to financial services and technology for Indian smallholders
To meet these challenges, Indian firm WRMS has launched a smart farming tool called SecuFarm. Based on an analysis of stored temperature, rainfall, ground moisture, air humidity and soil type data, the software provides smallholders with plans for sustainable use of their acreage. If the participating smallholders adhere to the required sustainable practices, they receive an insurance payout in the event of crop failure, ensuring a guaranteed minimum income. In the current test phase, the block chain already holds data from around 50 cotton farmers from the states of Punjab and Haryana.
Traceability enhances the business model
To support this approach, the German Federal Ministry for Economic Cooperation and Development (BMZ) is funding efforts to store the collected data on sustainable farming practices in a block chain. The use of block chain technology allows more transparent and independent monitoring of adherence to the stipulated farming practices; in addition, the more reliable data pool can improve the insurance model, which in turn means that farmers can be offered more affordable insurance premiums.
The block chain also makes it possible to track agricultural products: existing data on provenance and agricultural practices as well as transactions along the supply chain, such as harvesting and onward transportation, are stored in the block chain in a tamper-proof form. It is expected that in the long term this will benefit smallholders in particular, as the additional trust created by the use of the block chain can persuade consumers to pay higher prices for products manufactured in an environmentally friendly and socially responsible manner. This in turn could increase smallholders’ incomes.
An additional aim of the project conducted by the Global Initiative for Access to Insurance is to enable the Indian project partner to further develop and independently operate the block chain. To achieve this, a multi-day online training course was held jointly with dCentra, a service provider closely involved in developing the block chain with WRMS.
In the next step, further partners, e.g. food corporations or textile companies, are to be gained as cooperation partners for the pilot roll-out of the block chain based approach. Moreover, the block chain’s source code will be made available for use by third parties free of charge as an open source tool.
GIZ contact: Robert Fischle (firstname.lastname@example.org)
WRMS contact: Sonu Agrawal (email@example.com)
dCentra contact: Sorin Simplaceanu (firstname.lastname@example.org)