Pilot Insights | Farmstar: Using Web3-enabled Reward Tokens to Drive Adoption of Regenerative Agriculture
Image courtesy of Farm Star
The Context
Smallholder farmers in Kenya produce up to 80% of locally produced food. But this figure masks a troubling trend: many of these farmers are experiencing rapidly declining yields because of diminishing soil health.
Several studies show that decades of conventional agricultural practices such as synthetic input use, monocropping, and deep tillage have led to a deterioration in soil fertility in Kenya. Though many are aware of the benefits, smallholders are hesitant to transition to regenerative practices — the payoff is not immediate, and access to regenerative inputs and services is often limited.
At the same time, agriculture is responsible for 62% of domestic carbon emissions, making the incentivization of planet- and climate-positive farming behaviors critical in the fight against climate change.
The Pilot
In August 2023, Mercy Corps Ventures partnered with Farm Star, a subsidiary of Regen Organics, to launch a pilot to test the use of interoperable web3-enabled rewards to drive the adoption of regenerative agricultural practices among smallholder farmers in Kenya.
Farm Star is a leading distributor of organic fertilizer in Kenya, with a customer base of over 10,000 smallholder farmers and a country-wide network spanning over 1,000 resellers, and was recognized as a finalist of the Zayed Sustainability Prize in 2023. Farm Star’s flagship product, Evergrow, is a nutrient-rich, fully decomposed organic fertilizer made of 100% organic materials.
For this pilot, Farm Star launched a customer loyalty program providing farmers, largely medium and small-holders in Western Kenya, with flexible options for redeeming ‘points’ earned from purchasing Evergrow.
Through its partnership with Grassroots Economics, Farm Star provided farmers with a feature phone-compatible wallet accessible via USSD as shown in the screenshot below.
The rewards were interoperable and usable with other ecosystem platforms. For instance, users could exchange FSP for cUSD which can then be used within other compatible platforms such as MiniPay.
Qualifying customers earned Farm Star Points (FSP) in the form of web3 tokens in one of two ways:
By completing a “Registration” survey (130 FSP)
By completing a “Transaction record” survey upon purchase of Evergrow from participating distributors (65 FSP per 50kg bag of Evergrow purchased)
Additionally, Farm Star set a redemption pathway for pilot participants to redeem FSP points for Evergrow. In order to do this, farmers had to send their FSP to the distributor in exchange for either a partial or full discount on the fertilizer at the rates shown in the table below.
Farm Star planned to set up an additional pathway to enable pilot participants to redeem their FSP for Kenya shilling or fiat, but this proved to be untenable due to a mix of technical, socioeconomic, and political headwinds (we’ll expand on those below under Pilot Learnings).
A total of 117 farmers were enrolled in the program, and a total of $1,220 worth of FSP was disbursed. Of these, $95 worth of Evergrow fertilizer was redeemed with FSP points by a total of six farmers. The remainder still sits in the farmers’ wallets.
Due to unexpected challenges, the pilot was concluded without completion of all major milestones. Nonetheless, the pilot generated useful insights for builders rolling out web3-enabled solutions for rural farmer communities.
Pilot Learnings
The learnings from this pilot were multi-fold: a number of technological, macroenvironmental, and social factors introduced challenges to implementing the original design and roll-out plan.
The lack of available crypto to cash off-ramps and low smartphone ownership limited utility of FSP tokens
Offering farmers the ability to cash out of FSP to fiat proved challenging given low levels of web3 education and low levels of smartphone ownership. Several services such as KotaniPay and Bitmama offer off-ramping to fiat Kenyan Shillings, however, they require the conversion to an intermediary ERC-20 token such as USDC. This step proved challenging to perform for users equipped only with feature phones given that all existing solutions require a smartphone-based wallet to complete the transaction.
Without the capability to redeem FSP for cash, the utility of FSP for users was limited to Evergrow. While the discount provided by FSP was significant (users earned an effective 25% off their next bag of Evergrow with each purchase), this limitation discouraged many from continued participation in the program.
Features phones do not lend themselves well to capturing complex form data
While Farm Star successfully launched mobile wallets (in partnership with Grassroots Economics) that could operate on feature phones via USSD, capturing registration data via this SMS or USSD was not practical given the length of the form and complexity of the questions asked. As a result, Farm Star had to set up digital forms to onboard users and register their purchases. Due to the low levels of smartphone ownership, Farm Star representatives or agrovets often had to lend devices to users to complete the forms, which limited users’ ability to operate independently.
Government subsidy programs and related controversies slowed demand for organic fertilizer
Two key events over the past year have slowed the market: the introduction of new subsidy programs for synthetic fertilizers, and a controversy in which the Ministry of Agriculture distributed ‘fake’ fertilizers to thousands. The combined effect of these two events led to a landscape where synthetic fertilizers were subsidized to be price competitive with organics, and all fertilizers’ composition was under scrutiny across the country. While the farmers engaged by Farm Star were excited and impressed by the results Evergrow had demonstrated, they held a healthy dose of skepticism toward implementing new practices in the given environment.
The participation rate among female farmers was lower than that of males
Female farmers comprised close to 50% of participants in Farm Star’s onboarding sessions. However, female farmers ended up accounting for less than 35% of registered and rewarded users. Farm Star observed that while female farmers were excited to enroll and engage with the loyalty program after a session, they often cited the desire or obligation to consult a man (either a partner or parent) before enrolling, and have him be the account holder for their farm’s FSP. As a result, Farm Star was unable to secure the enrollment of female farmers at the time of training, and many of these attendees did not end up enrolling in the program.
Evergrow fertilizer drives increased income for farmers
While this pilot did not specifically measure the impact of Evergrow organic fertilizer on the yields and incomes of farmers, a 2023 study conducted by Regen Organics showed that using Evergrow resulted in a 37% increase in income of smallholders driven by higher yields. Moreover, Evergrow improves soil health, water retention and soil biodiversity, resulting in improved climate resilience of crops.
Next Steps
Despite the challenges encountered, this pilot yielded several useful insights for builders planning to roll out web3-enabled solutions targeted at rural communities. While web3-enabled solutions continue to hold great promise for addressing the needs of underserved populations, there are still gaps such as a lack of crypto off-ramps for certain geographies and low-end smartphones, which limits the utility of the solutions for certain user groups.
This post is the second of a two-part series; the first blog shared details of the pilot launch and the hypothesis we set out to prove. Written by Avkash Mukhi, Product Manager, Regen Organics and Timothy Asiimwe, Innovation Project Manager at Mercy Corps Ventures.
