Enhancing Financial Inclusion for Smallholder Farmers Using Blockchain Technology

Smallholder farmers, vital contributors to 80% of developing countries’ food supply, face a substandard socio-economic status, often excluded from formal financial institutions. This hinders their ability to produce ample high-quality harvests, trapping them in poverty due to limited access to premium markets. Financial inclusion aligns with eight of the United Nations’ 17 Sustainable Development Goals. However, achieving financial inclusion for farmers requires improved market conditions. Existing markets offer farmers a mere 1/3 to ½ of retail prices for fruits and vegetables. Therefore, fostering better markets is crucial for smallholder farmers to sell produce at higher prices, breaking financial barriers.

Main Research Question
How digital technologies can be used to overcome the key barriers to financial inclusion for smallholder farmers by enhancing market mechanisms and using blockchain technology for trust building?

Methodology: Design Science Research Methodology

Results:
This research proposes the Digital Trust Transformative Market Model, introducing three markets: spot, smart contracts, and smart futures contracts. The spot market facilitates immediate, low-trust exchanges. As trust builds, participants can engage in contracts in the smart contracts and smart futures contracts markets, allowing for planned harvest transactions and upfront payments.

The proposed model assigns ranks to farmers, buyers, and the farming community based on market activities, fostering trust relationships and social capital over time.

Timeframe: 4.5 years

Conclusion:
The Digital Trust Transformative Market Model empowers smallholder farmers by enabling aggregated marketing in three markets, fostering trust relationships, social capital, and social identities. This paves the way for enhanced financial inclusion and poverty alleviation.