In a report issued by GTR, a blockchain initiative has brought cryptocurrencies to the commodity financing space, providing USD 10 million-worth of loans to 50,000 smallholder farmers in Africa.
The project is run collaboratively between Block Commodities, a blockchain-focused commodities trader operating across Africa; Wala, a blockchain-powered financial services platform; Dala, a provider of a crypto-token designed to enable instant, zero-fee and borderless micropayments, and FinComEco, a company that helps farmers get access to a wider market for their crops.
The parties will develop and operate a range of platforms, projects and initiatives in the agricultural commodity markets sector in Sub-Saharan Africa.
The goal is to help farmers maximise the value of their agricultural output by providing access to financing and the ability to track their commodities through blockchain technology platforms.
The first project will kick off in Uganda, where Block Commodities and FinComEco will lend 100 million Dala tokens – equivalent to USD 10 million – to smallholder farmers in order for them to purchase fertiliser. In time, the same will be provided to local farmers in South Africa, Congo, Malawi, Zambia, and Zimbabwe.
By using cryptocurrency and blockchain technology, the companies are able to streamline payments and loans, and thereby provide farmers with access to financing at more affordable interest rates.
Rather than launching its own token, Block Commodities chose to work with Dala because its token is already in use across Africa. The token will work as a bridge currency between fiat currencies, making cross-border transactions easier.
The farmers will be able to transact and cash in and out with Dala at over 100,000 merchants throughout Africa, facilitated through partnerships that Dala and Wala have with Mvendr, a mobile point-of-sale service for small merchants, and Spazapp, an e-commerce management platform.
The loans will be paid out to the smallholder farmers targeted by the project in October 2018. For Block Commodities, the fertiliser project in Uganda is just the beginning, and it will be looking to expand to other projects – including other commodities and countries – laterin 2018. This could involve partnering with other companies and using other tokens.
The reporting was done by Sanne Wass, Senior reporter, GTR.