Pilot Launch | WËIA & Heincke: Raising smallholder incomes through blockchain traceability
Smallholder coffee farmer in Colombia (Image Courtesy of Mercy Corps)
In the lush countryside of Colombia, Juan rises with the sun to tend to his crops. Like many smallholder farmers in his region, he works tirelessly in his fields each day, without formal employment or official financial records. Despite his dedication, Juan struggles to secure loans to invest in his land, which makes it challenging for him and his family to be productive and make ends meet.
Juan’s story is not unique. Over 86% of smallholder farmers in Colombia operate informally, lacking credit histories and transactional ledgers. This absence of validated transaction records creates significant barriers to sustainability and financial inclusion. With 79% of the rural population devoid of access to credit lines, smallholder farmers like Juan earn only 70% of the minimum living wage, perpetuating a cycle of poverty.
Moreover, buyers of agricultural products face difficulties verifying the sustainability claims made by these farmers. In an era where end consumers are increasingly conscious of food origins, high rates of product mislabeling exacerbate the estimates that up to 10% of the global food system is affected by food fraud, accounting for $50 billion annually. This challenge complicates the ability to substantiate sustainability claims, especially with the upcoming EU Deforestation Regulation (EUDR) set to take effect in December 2024. The EUDR mandates strict traceability and sustainability documentation, making it harder for smallholder farmers, who often lack the resources (capital or knowledge), to acquire such systems or technologies. Furthermore, traditional credit lines do not contemplate investments in traceability or sustainability technologies.
The Pilot:
To address these pressing challenges, Mercy Corps Ventures has partnered with WËIA and the Heincke Group to launch a pilot testing the ability of blockchain-powered traceability to increase income for smallholder farmers in Colombia and Spain.
Here’s how it works:
- Farm Now, Pay Later (FNPL): WËIA offers farmers like Juan immediate access to agricultural inputs without upfront costs. This means Juan can purchase the necessary agri-supplies, such as seeds, fertilizers, pesticides, and irrigation equipment, when he plants his crops and wait to pay for them until he sells his harvest.
- Blockchain Traceability: The platform, launching on XRPL, traces the journey of agricultural products, from planting to harvesting, providing verifiable sustainability data via QR codes. Businesses can now track where their products come from and understand how their sourcing impacts the environment.
- Market Linkage: By linking farmers directly with input suppliers and produce buyers, the project helps stabilize income and foster stronger relationships. As a result, companies experience less price volatility when sourcing goods and build stronger connections with their stakeholders.
Approximately 300 smallholder farmers will participate in the pilot, processing 240 tonnes of panela (unrefined whole cane sugar) monthly. Notably, around 46% of Heincke’s smallholders are female, compared to the 26% of female farmers at the national level, highlighting the project’s commitment to inclusivity..
Key Partners
WËIA: A blockchain traceability platform offering origin traceability and Farm Now, Pay Later (FNPL) loans.
Heincke Group: A Colombian company producing panela for international markets.
A Vision for a Sustainable Future
Fernando Heincke, CEO of Heincke Group, shares his optimism:
“At Heincke, traceability not only ensures quality; it is the key to creating a more efficient, sustainable, and fair value chain. Every piece of data we capture opens doors to better conditions, financial inclusion, and carbon footprint reduction, benefiting both farmers and the planet. This is our Heincke Legacy, a legacy we’re building today and the one we want to leave for generations to come.”
Our Hypotheses
We hypothesize that blockchain-enabled traceability will:
I) Enhance the value of agricultural products by providing verified sustainability claims.
KPI — Product Premium (%): The percentage increase in product price attributed to sustainability certification. This shows how much more consumers are willing to pay for verified sustainable products.
II) Improve customer satisfaction through enhanced transparency and sustainability.
KPI — Customer [Retailers] Satisfaction Score (CSAT): This measures how satisfied retailers are with their purchase resulting from the increased transparency.
III) Strengthen relationships between farmers and corporate buyers by enabling more formal agreements, such as forward contracts.
KPI — Number of Farmers with Forward Contracts: The total number of farmers willing to sign forward contracts with the corporate buyer [Heincke Group] at the end of the pilot, showing potential growth in formal agreements.
Conclusion
This pilot, which will run from October 2024 to March 2025, offers a unique opportunity to demonstrate the real-world potential of blockchain traceability in agriculture. For farmers like Juan, this represents a chance to break free from the constraints of informal markets, gain access to financial services, and improve their livelihoods. If successful, the project could pave the way for greater financial inclusion and increased incomes for farmers across Colombia and Spain, all while ensuring compliance with global sustainability regulations.
We invite you to follow our journey as we share updates, evidence, and insights from our Mercy Corps Ventures pilots. Together, we’re responsibly testing web3 solutions for unbanked and underbanked populations in emerging markets, striving to create a more inclusive and sustainable future.
