African Farmers Benefit From Cryptocurrency Solution To Fertilizer Distribution Issues

Blockchain, FinTech, Innovation, Investing, News | April 6, 2018 By:

Wala, a blockchain mobile financial services platform, has a strategic partnership with Block Commodities and FinComEco that will provide 100,000,000 Dala token loans (equivalent to $10M USD) to 50,000 smallholder farmers to purchase fertilizer. The program starts soon in Uganda, and in time, the same will be provided to local farmers in South Africa, Republic of Congo, Malawi, Zambia and Zimbabwe.

The goal is to empower smallholder farmers with fertilizer. That will maximize the value of their agricultural output by providing access to financing and tracking their commodities through blockchain technology platforms. The partnership provides a solution to the lack of affordable and accessible financial services faced by many in the industry.

This partnership enabling agricultural finance on the blockchain will be enhanced by existing Dala and Wala partnerships with Mvendr, a mobile point-of-sale service for small merchants, and Spazapp, an ecommerce management platform for small merchants to manage and purchase new inventory from wholesalers and brands. The Mvendr and Spazapp networks provide Wala users with the capability to transact and cash in/cash out with Dala at over 100,000 merchants throughout Africa.  These partnerships further expand Dala payment capabilities for consumers, merchants and suppliers, and form important parts of the fast-growing Dala ecosystem.

Wala co-founder/COO Samer Saab talked with Block Tribune about the challenges facing his organization.

BLOCK TRIBUNE: Tell me about the problems for sub-Saharan farmers and obtaining fertilizer.

SAMER SAAB: Yeah, absolutely. So there’s a massive shortage that exists for farmers. It mainly comes from the fact that there’s just poor distribution throughout these regions. So, there is from a global perspective a desire to try and service these customers and provide fertilizer, but because of the actual challenges and supply chain issues, the high quality fertilizer that comes into the country gets chopped up and turned into a much lower quality product that gets marked up as much as 100% by the time it actually reaches the farmer.

What ends up resulting is this incredible shortage where you have maybe 5% of needs are actually being met with fertilizer. And it ends up being very expensive and very low quality fertilizer. And that’s on the supply chain side. Couple that with the fact that the actual terms of financing. In terms of the way that farmers can actually go out and obtain loans and capital to pay for fertilizer. [inaudible 00:03:08] don’t really meet the needs of the average farmer. The typical rate of a loan for fertilizer is not only expensive but it also requires repayment on a monthly schedule, which for a farmer that harvests over say 3 or 6 months, they’re not actually getting any sort of income until the whole harvest completes and they can sell the yield.

So what they’re forced to do is take out secondary loans over the course of the 3 or 6 months of that harvest to be able to pay back the initial loan they used to obtain fertilizer. So this is the big gap that needs to be filled and the big problem that needs to be solved both on the supply chain distribution side and on the actual financing side to make the system work.

BLOCK TRIBUNE: So why are tokens the solution here?

SAMER SAAB: So, what this allows is the opportunity for these global entities, Block Commodities and FinComEco, to come in and invest in these regions and actually have ownership over the entire capital supply chain. So they come in through their existing offering to uphold the actual distribution of fertilizer, but they needed a solution in place to provide capital infrastructure as well to decrease the risk in the flow of money sent to farmers but also in return from farmers as well. Leveraging the existing payment rails, leveraging the existing sources of capital and financing ends up being too expensive and too high risk that you make system profitable and successful for these multinational entities that are looking to invest in these regions.

BLOCK TRIBUNE: The system that you described seems very corrupt because the fertilizer’s being cut several ways and the distributors are sort of gouging them. How are you monitoring the situation? How are you going to prevent that from happening again?

SAMER SAAB: So for these and FinComEco, this is their expertise, so they’re using the Blockchain to actually track the flow of goods, specifically fertilizer, from the sourcing or the global end sourcing all the way to the farmers and make sure that it’s going through this network of actual trusted distributors to get to the end farmer. So, that’s just part of the Blockchain solution to ensure that the quality is actually going through from the source to the farmer.

BLOCK TRIBUNE: And this will monitor the price and make sure that the quality of the fertilizer is the same all across the board?

SAMER SAAB: Exactly, yep. And so the entire purpose is that it gives not only the farmers more clarity and transparency, but it gives the Block Commodities and FinComEco the same level of touch and interaction with the farmers because they can see the entire system. They can actually reach the farmers directly through this blockchain basically it enabled the flow of the goods and the capital. So, it allowed them to connect with the farmers directly without having to have this massive operation which got everything flowing.

BLOCK TRIBUNE: How will the participating farmers be selected? 

SAMER SAAB: So, that is part of the blockchain commodity network. I actually don’t have that much visibility into that so I can’t actually comment there. But their active network inside of Uganda is 50,000 farmers, so that’s the initial target for distribution in the early forms of enterprise.

BLOCK TRIBUNE: Are the farmers savvy enough to handle the sometimes complicated transactions that go with cryptocurrency?

SAMER SAAB: I don’t think anyone in the world is savvy enough to handle the complicated transactions of cryptocurrency. So we have to actually provide an experience that is more suited to their understanding. And that is working within the specific bounds of what they actually deal with, what their finances are on an ongoing basis. So the farmers, they’re familiar with mobile money, they’re familiar with obviously SMS and USSC based solutions.

Some farmers actually have smartphones and do engage in internet solutions like Facebook and WhatsApp. They have to be able to provide an experience that uses crypto, but probably doesn’t go to the level of getting in control over private keys, because it’s still bridged too far in customer experience for the target market.

BLOCK TRIBUNE: So, it will be somebody who will basically be handling that transaction to ease their path?

SAMER SAAB: Yes, exactly.

BLOCK TRIBUNE: Okay, how do the governments of these regions feel, particularly in Uganda where there’s this huge network? Are they cooperating? Are they understanding of it? Are they attempting to get their piece of the pie?

SAMER SAAB: Yeah, so there’s a couple things on there. These types of programs used to be government-led, or they used to be government partnerships. And actually that was where these organizations that are now gonna be using Dola had been operating before, but the governments weren’t reliable in actually being able to support these systems from a financing and capital perspective and then also being able to provide the commodity exchange in the back end. So, the failures in government actually pushed these entities to find alternative solutions.

From a regulatory perspective, it still varies and it’s still very much up in the air. We are getting mixed sort of results and feelings both across government and then within government. So, for instance, South Africa is one market where the government or the different entities, they’re still taking no action. They’re waiting and seeing. They’re engaging with a company, such as ours, to understand the implications and the potential impacts both positive and negative. And obviously what they care about it is tax revenue and understanding how that is gonna play a part.

Uganda is a market where the central regulators are worried about consumers getting involved in scams, but they haven’t taken any strong stances for Oruga’s cryptocurrency. So we’re still in this sort of “what are people gonna do? What aren’t they gonna do?” And I think that if we can lead with actual proper examples of the great news cases for cryptocurrency then we can actually start to drive the discussion for these regulators and hopefully get them to the point where they’re actually full supportive and on board.

BLOCK TRIBUNE: Now this is a charitable effort on the part of investors who try to get involved in this. Is that a correct assumption? There aren’t any huge profits off this?

SAMER SAAB: No, actually, I think that’s probably furthest from the truth. The actual economic opportunity and servicing these farmers is massive and I think that’s one of the common misconceptions about the region in general. Even though we’re talking about smaller sums of money on a per customer, per needs, or per farmer basis, the actual economic opportunity is still incredibly large. The opportunity for these organizations that we’re working with is two folds. One, the opportunity to distribute fertilizer and sell it at some margin, so there’s that one. Then there’s the opportunity for financing, even at low cost financing to be able to provide a margin. Even at reasonable, ethical rates that actually support and drive economic growth.

There’s a lot of business misconception that poor people are all mean and need of charity. The reality is that they would much more benefit from good investment because there are a host of natural resources: farming, great great farming, soil, and great farming environments is just one. So on a continent that is just full of farmers, if you can enable them to get better output, what you’re talking about, major impacts to the local communities, the local economies, and even potentially the overall GDP and economic activity for an entire country in reviews. I think there is a large amount of value that any sort of investors can get by going in and supporting and that’s what Block Commodities and FinComEco have recognized.

BLOCK TRIBUNE: There’s an issue in several African countries, including yours, where farms are being taken over and nationalized. What do you see as the impact treads over what you’re doing?

SAMER SAAB: Yeah, I think that’s pretty troubling. It’s something that we monitor. There is political turmoil and I think that’s just part of something you have to accept when working in these regions where you do have increased political and government instability. It does increase the overall risk factor, but I think that with respect to what this program specifically is doing, it’s targeting a level of farmer. Which, specifically, it’s the smaller farmers that have maybe a couple acres at most who are less likely to have their actual farms nationalized. I think the bigger risk is the larger commercial farmers that have a large amount of land. Which is still very troubling and it is a major issue, but I don’t think that those farmers or those activities are going to necessarily overlap the target farmers for this program.

BLOCK TRIBUNE: What will success look like in your program? Give me the big picture. If all goes well, what happens?

SAMER SAAB: Yeah, good question. So I think, first of all, farmers being able to take fertilizer and actually increase they yield of their harvest and generate a much larger output, create a big return on the loan that they got and then fully repay their loan. And then the secondary benefit of that is the farmer having larger income, better support through family, better engaged in the local community, and then increased the actual economic activity in these local villages and suburbs. And then next after that, if it works well, then we get repeat customers, in terms of farmers, so they’re coming back for more fertilizer and might have just even more economic activity at a country wide level.

I think that’s really possible and then we’ll see more farmers going and getting more fertilizer and hopefully we can close the gap on what’s actually needed in terms of the shortage of fertilizer in each one of these countries that we’re targeting.

BLOCK TRIBUNE: Okay, do you have any ICO plans?

SAMER SAAB: Yes, so we did an ICO in December for incoming currency Dala. We sold about $1.5 million dollars worth of tokens. We are currently focusing on just building out the ecosystem, watching the initial Dola wallet with the launch partner for Dala and working on supporting partners like Block Commodities and FinComEco to actually start using the token to reach consumers. And then our focus later this year will be to get more tokens into the market to support further development of the ecosystem.

BLOCK TRIBUNE: Will you be working with other companies as this grows?

SAMER SAAB: You probably don’t want to quote me because I don’t have the exact fact, but I think there are several hundred million farmers on the continent. We’re initially just targeting 50,000 people, so if we’re able to do this successfully, I think the actual potential output or the potential upside for this program is massive, not only in it’s potential in terms of value, but in terms of the number of people that could be impacted and the overall value can be driven to the project.

So, I’m excited that we able to identify this partnership thing and get this going, and I’m hoping that what we’re gonna end up finding is that other companies that have been interested in Africa for whatever reason will now find that there is a reasonable pathway to actually investing and doing so, using cryptocurrency, to decrease their risk of operating in the local markets. So, we’re expecting to see more in that.