Blockchain technology can play a crucial role in the agriculture sector by solving issues such as agri-product fraud, price manipulation, traceability, and increasing trust between producers and consumers.
It is emerging as a crucial tool in managing microfinance and fintech payments in the agriculture industry by increasing transparency, aiding in the simplification of the buying and selling process of crops using smart contract builds, and enabling peer-to-peer transactions that execute automatically once all conditions have been met.
This results in increased financial trust by ensuring overall transparency and traceability across the entire supply chain in the agricultural sector.
Blockchain is capable of eliminating transaction-based risks and promoting trust by creating a transaction history that’s tamper-proof, along with automatic execution of contracts that helps with better management of microfinance and payments.
The agricultural sector still lacks formal identification and access to borrowers' credit history and collaterals, making it difficult to enforce contracts.
This makes it difficult to access formal financial services affecting the entire value chain, as farmers are unable to maximize yields due to a shortage of funds, and buyers may find it difficult to meet an adequate supply of commodities.
Blockchain can help solve this issue by increasing trust between lenders and borrowers by opening up microfinance options that could result in increased yields and enable them to sell their crops at adequate rates.
This currently doesn’t happen because a lack of funds leaves farmers strapped for cash and open to exploitation by loan sharks, forcing them to sell their yields at lower rates to get faster payments.
One of the primary roles blockchain can play is through a model called the blockchain-based producer-consumer model that can enable farmers to interact with consumers directly, allowing them to sell their products at the best possible price.
This process can help cut out middlemen, increase profits, and provide faster payments to the farmers. If the model is implemented, it could create a seamless buying experience between farmers and consumers without allowing inter-agents to pose as consumers.
This approach will allow both farmers and consumers to initiate transactions by creating a block for that particular transaction and would result in faster payouts for the farmers without having to sell products at lower prices which is currently the practice.
Even though blockchain has a complex working system, it is designed to make transactions easier.
Whenever a transaction is initiated, all details pertaining to that transaction, such as the price, asset, ownership, etc., are first recorded and then verified to ensure complete security, transparency, and traceability.
Once it’s been verified, the payments are settled within seconds. A verified charge is recorded in any of the shared ledgers and also on every other copy of the ledger simultaneously. This keeps everything simple, transparent, and efficient for everyone in the entire agricultural supply chain.
Since everything in the blockchain environment is accessible by all parties, and no single person can fudge with the data as everything exists on a shared ledger, it boosts the confidence of everyone involved.
Blockchain can thus play a crucial role in increasing trust between smallholder farmers and buyers in the following ways:
Blockchain is a groundbreaking technology that is changing the very nature of how business transactions, microfinance, and payments are carried out across industries around the world.
Even though the technology is still being tested and hasn’t gone mainstream yet in the Indian agriculture sector, it has a lot to gain once it’s deployed and fully operational.
Not only will it help manage payments better and provide regular and secure access to microfinance, but in doing so, it could usher in a whole new era in food production due to increased incomes, without payment delays and other issues currently plaguing the agricultural sector.
