Abstract
Smallholder farmers produce over 70% of the world’s food needs. Yet, the socioeconomic conditions of the smallholder farmers are substandard. One of the primary reasons for this unpropitious situation is that they generate modest income by selling their harvest due to the lack of trusted buyers and organized markets. This research explores how technology can enable the trust to reduce transaction-related risks, empowering unknown parties to transact. Blockchain technology has the potential of mitigating transaction-related risks and promoting trust with a tamper-proof history of transactions and automatic execution of smart contracts. Based on blockchain technology to promote trust, this research has discovered a novel approach for smallholder farmers to conduct exchanges by generating social capital as an individual and using that social capital as collateral for financial exchanges when establishing contracts. This approach empowers farmers to trade smart futures contracts on behalf of the expected harvest at a better rate to receive some cash in advance to be used in the cultivation process to produce a high-quality harvest that attracts better rates. It also enables them to perform aggregated marketing with enhanced market linkages that, in turn, assist in increasing margins made by the farmer.
Highlights
Smallholder farmers produce over 70% of the world’s food needs [1], yet, the socioeconomic conditions of the smallholder farmers are substandard
This situation implies that minimizing the risk of not being paid by establishing trust between farmers and unknown brokers has the potential of enabling farmers to choose any broker with competitive prices without relying on known brokers
In this paper, we present the novel approach of establishing social capital by enabling trust progressively between unknown parties based on blockchain technology, facilitating them to engage in three different exchange patterns: deliver material to receive money on the spot, deliver material early to receive money later and to receive money early and deliver material later, in a futures market platform
Summary
Smallholder farmers produce over 70% of the world’s food needs [1], yet, the socioeconomic conditions of the smallholder farmers are substandard. In this paper, we present the novel approach of establishing social capital by enabling trust progressively between unknown parties based on blockchain technology, facilitating them to engage in three different exchange patterns: deliver material to receive money on the spot, deliver material early to receive money later and to receive money early and deliver material later, in a futures market platform. This proposed approach is applicable to any domain, in the Agri domain.
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