Using Blockchain to Manage Microfinance and Payments in the Agriculture Industry

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Written by
Shivani Tripathi
Published on
September 13, 2022

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.

Role of Blockchain in the Agriculture Industry and Managing Payments


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.

Blockchain Approaches in Agriculture

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.

Role of Blockchain in Direct Farmer Marketing

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.

Role of Blockchain in Simplifying Transactions

Microfinance in Agriculture Industry

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. 

Blockchain Technology as a Trust Enabler between Smallholder Farmers and Buyers

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: 

  • It can empower farmers to build long-term trustworthy relationships with a buyer who can offer higher prices while reducing transaction-related risks, which isn’t possible using traditional methods.
  • Future contracts can help farmers sell expected harvests while eliminating the risks of future price uncertainties by using social capital as collateral. 
  • It can help farmers establish MOM market linkages, which can provide them with a higher bargaining power that’s not possible with the current system in place. This will give them access to much bigger markets, sell at better prices, and get faster payouts. 
  • Farmers will have access to microfinance without resorting to loan sharks or banks and use that money for better yields that can help them get better rates, connecting them to the mainstream financial system without its associated financial risks. 


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.

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