Leasing on Blockchain: DeFi for smallholding farmers

Rotterdam, Netherlands. Apr 20, 2020

An estimated 500 million agricultural smallholders farm up to two hectares of land, supporting 2.5 billion people’s sustenance in their household [Hazell 2011 and Christen and Anderson 2013]. In spite of their significant contribution in increasing food supply to large corporations, smallholder farmers have little or no access to formal credit. According to World Bank estimates, even promising approaches to expand smallholder lending, such as value chain finance, have reached fewer than 10% of smallholders dedicated to growing high value cash crops.

Economic events like the COVID-19 pandemic aggravate the agrarian distress especially to the smallholder community. Their risk of food insecurity with low incomes and limited market access due to the supply chain disruptions affect local communities including commercial, semi commercial and subsistence farmers.

Smallholder farmers require new strategies to generate adequate farm income and profitability. Qlikchain is developing decentralized finance (DeFi) solutions which leverage decentralized networks to raise capital directly from buyers of farm produce. In this model farmers can establish longer term, transparent and direct relationships with buyers based on farmer’s cost of production. In return, the buyers  gain access to ecological produce that eliminates the risk of exposure to harmful chemicals. These shorter supply chains lower food miles, raise trust, quality, and enhance biodiversity.

Flor Y Sabor, a dutch company supports smallholding farmers in southern Spain in preserving their ancient olive grove (as old as 1300 years!) and producing the finest freshly pressed extra virgin olive oil. Qlikchain implemented a direct to consumer model where farmers are provided access to a leasing marketplace and consumers can adopt olive trees in lieu of olive oil supplies from the farm. Inspired by the farmers, Flor Y Sabor is helping preserve traditions of these ecologically certified olive groves and build a bridge between lovers of delicious fair trade products and these hardworking, honest and passionate farmers. 

FLOR Y SABOR: ADOPTION OF OLIVE TREES ON BLOCKCHAIN

The leasing application was developed on Qlikchain’s blockchain platform, Borlaug Web Services (BWS). The platform includes Borlaug blockchain which provides modules including decentralized identity, asset registry and on chain governance to promote transparency in this short supply chain. Following are the highlights of the application:

• Digitization of all farm assets (trees) on BWS blockchain

• Ecologically certified gardens that follows sustainable farming principles

• Olive trees tokenized for Adoption by Individuals & Restaurants

• Certificate of Lease stored on blockchain and verifiable 

• Direct to home delivery of cold pressed extra virgin olive oil from the garden

• Access to capital for smallholding farmers in the beginning of the harvest

• Pre-sale of the farmer produce to adopters significantly lowering their risk

BORLAUG BLOCKCHAIN

Technology is vital when creating decentralized supply chains that would empower the smallholder farmers and micro traders. Qlikchain’s vision is to help build local sustainable food economies and food sovereignty amongst consumers. Borlaug blockchain was built from ground up to help create fair price decentralized marketplaces that ensure equitable wealth distribution to farmers by shortening agri supply chains.

• Decentralized ID: BWS maintains DIDs of farmers and adopters. This module provides verified digital identities on the blockchain  

• Asset Registry: Collection of the olive trees from multiple farms. Scalable model to create multiple registries and management via an app.

• Asset Tokenization: Olive trees tokenized (allocation of shares) for adoption (leasing). A full or half a tree can be adopted. Asset information on the blockchain provides information on allocated / available shares of any tree.

• Leasing: Shares to trees are issued and a certificate of lease is generated on blockchain. Leasing contracts of olive trees to end-users on blockchain for individuals and restaurants. The platform provides management of contracts for businesses to administer incoming requests, updates to leases, termination and expiry of existing leases. This would elevate customer experience and boost investment prospects

• Access to Finance for smallholding farmers at the beginning of the harvest. Tokenized P2P lending platform to enable leasing of equipment, assets and adoption services providing  early access to working capital and pre-sale of the produce to lower risks

BWS chose Parity’s Substrate framework to build Borlaug blockchain for the following reasons:

• ability to introduce new built-in primitives for DIDs, Assets, Lease etc. for optimized performance

• higher transaction throughputs and rapid block finality rates

• totally customizable features such as block sizes, consensus, etc.

• Parity’s commitment to blockchain space

Michiel Drijver, owner of Flor Y Sabor states “We want to deliver the best and the finest Olive Oil to the consumer’s table from these honest smallholder farmers. The large retail chains buy olive groves, regularly mix pure olive oil with sunflower oil, or manipulate the ingredients to sell the oil as cheaply as possible. We want to create these short chains of trust and integrity and blockchain technology provides us with transparency and traceability.” 

Our mission is to promote ecological agriculture that is not dependent on intensive chemical and capital inputs, leading to more food and nutrition per acre and enabling sustainable livelihoods in local rural economies.