How DeFi Revolutionizes Agro Financing

Transcript

I'll learn maybe I'll just start with an intro because I'm the least interesting one here so people can come for your own introductions uh so my name is akanakin um I play several roles related to the panel today so I'm the co-chair of the western chapter the crypto Valley Association I'm based in Geneva in Switzerland and I'm also one of the co-founders of toranet and I also been working alongside Ernest and Balaji uh concerning the agua financing projects and and the owner we've met and had several exchanges via email also on the

topic of planting financing so really happy to to dig into this question today um I will please ask you to present yourselves you'll do it better than me so maybe in the order of my ski screen Ernest would you like to go first oh thank you uh I'm excited to be on this platform to talk about AG Finance and the Innovative solution that you are bringing to it uh my name is Ernest I'm private sector specialist on the fit the future Agricultural Extension and advisory Services activity one of the feed the future

interventions of the United States agency for International Development I'm based in Abuja Nigeria working with the Varian Corelli Nigeria and tournament on this initiative thank you thank you very much Ernest uh Joanna would you like to go hi hi I'm Joanna yo I'm the CEO and founder of aruca which is aiming to scale financing to small businesses and farmers and visualized Supply chains um and with a focus on sustainable Finance fantastic thank you very much alleged certain yeah yeah things are kind things honest and thanks Joanna my name is Balaji I'm

one of the co-founders of torrent hits I'm a Serial entrepreneur that's what I do but I'm an agric innovator that's where my strengths lie and I've been innovating in agriculture for 10 years now and interesting we have a shared history with honest the largest ever technology for agriculture program on the African continent called e-wallet we co-created it together many many years ago with the current president of African Development Bank that was a big success story for technology and Agriculture and I thought everything input supplier financing in fact donating missing was extension inside that program and what we call agrify today is building upon that Foundation to kind of

make things work better for the farmer you know and now totally from a private sector perspective you know from government so that's how I introduce myself thank you very much everybody before we jump into the blockchain aspect and the D5 aspect and how can these Technologies help with agrofinancing uh maybe we start because everybody who's on this call might not be super familiar familiar with the issue itself so um I think Earnest you're really a good person to ask this question to start with what do you think are the challenges of Agro financing at least from your plenty experience in this sector and and yeah what are the main issues that that remain to be solved today

well uh those issues are profoundly the things that everyone else can easily identify we talk about the sustainable development goals that seek to achieve setting uh human uh index accomplishments by 2030. the first two sdgs have to do with their education of poverty and hunger and we know that for this to happen there has to be substantial increase in Investments in Food Systems and the agricultural sector

and so what we find is a situation where the volume of financing that is going into agricultural production does not seem to match this expectation that by 2030 um hunger and poverty will be eliminated I give you an example of Nigeria um Nigeria is essentially an agrarian country with agriculture continuously contributing 25 percent of the GDP and yet that sector employs 42 about 48 to 49 or even 50 of the total employment that tells us something

that a sector that employs the greater majority of the people of the workforce contributes 25 percent of a GDP uh while as a sector it is uploaded it also points to a basic inefficiency um that that sector continues to grab uh grapple with because if resources are appropriately allocated there's no way 50 of the population should be contributing 75 percent of the economic resources of the country so there's something that is not right with agriculture uh in terms of its punching its full weight in an economy like

Nigeria and of course it we see that picture across the globe in different forms and one reason is that agriculture is not getting the kind of funding it requires again we have a situation in Nigeria where like biology mentioned the issue of extension service the situation in Nigeria is such that you have one Agricultural Extension agent servicing about 10 000 small Huda farmers and when you compare this to FAO prescription of about 600 Farmers to one extension agent which is more like the global average you find out that we are

trying to achieve the impossible here in terms of extension agents and family issue what is behind this situation inadequate funding so you find inadequate funding at various levels a public sector level in terms of government infrastructure and private sector level in terms of commercial financing going directly to smallholder Farmers and that sector has been characterized in so many uh unprintable uh languages as a black hole in fact in one instance it is called a black hole where somebody goes in that you don't know What Lies Beneath the surface and you don't know your way out and all of that traceable to this issue of organizing

smallholder farmers in such a way that they have access to to to Capital that will enable them activate the production assets that they have and quite frankly the production the the arable land available in the country are in the hands of smallhood Pharmacy and yet they don't have Capital to mobilize this production uh productive asset so as to really produce efficiently and try the economy since we say we have an agrarian economy so here you find a situation where extension becomes very very important and that is why the usaid chose to

intervene from that space how can we provide enough resources so as to guide farmers on most impactful practices and efficient technologies that can make them produce competitively and when you get them to adjust their attitude and adopt these most impactful practices how do you finance the inputs the processes the technologies that are needed to produce efficiently and competitively such that this largest employer of Labor that has a custody of the largest production Assets in terms of land can therefore contribute to economy and economic development in a way it should so we we find here a situation that emphasizes the need for greater access

access to finance deployment of capital in a way that the smallholder farmers who are available there who have access to land can use available technologies that are everywhere and they can afford the charge to deploy it and produce effectively and that is a challenge thank you I'll wear you know this a little further thank you thank you to like supplement a little bit on at least from where we sit in Asia and and I'm sure there's like there's some areas of overlap and then I think um so where we're starting is we're very focused on Supply chains um so partly because those are guys we can partner with who are

um already establishing these like digital ecosystems so I mean you know what where our platform really aims to do is to connect Capital to these borrowing needs so exactly to your point like there's a huge gap and what we find are some of the key um issues so there's the general issue um first of all like if it's pre-harvest financing um I think some of these are very legitimate issues so one is there are concerns about risk around um side selling so like a farmer may have agreed with you to produce corn for you but then um you know short term they have some cash need because someone needs to go to

the clinic some bill needs to be paid someone gets into an accident um and there isn't very much available to them in terms of short-term credit so sometimes there's a bit of that kind of risk um and and that's one challenge we see another challenge this is General um Harvest uncertainty so there is crop failure so without access to some level of insurance where that protects financiers from that kind of risk there's a little bit more of a worry because like they can manage that if it's a large agriculture agricultural like production um that to monitor but then if they're monitoring across a lot of small holders they need help with some kind of um like

intermediary sort of structure or ecosystem to support them um the other thing we see uh then relatedly to that and and you know the the structure could be a little bit different in some in in Nigeria and some of the other markets in which you guys operate but um a lot of times the um in at least Indonesia and India where where some of our starting partners are a lot of them even if they're not that far away from the city um they don't actually have any access to like banking records they don't have um formal credit history um so I think a key issue one of the things we try to tackle a little bit and I'm sure um torinette's going to be

talking about this too is um can we help develop portable credit histories for Farmers um whether it's because they don't have a bank account or in another case there's also something kind of interesting that we see where someone may have a bank account but their relative has borrowed their bank account to do something else within the village and then some things happen so there's a lot of like strange little frictions that all together um create a lot of difficulties for for large-scale lenders um to lend without partnering with some kind of intermediary structure and and so that's what we aim to do and provide and what we're finding is that not only

do we need um like an intermediary layer towards Capital markets but we ourselves need to work with ecosystems that can help pool risk so that you're not dealing with like one-off smallholder Risk but like a financier can feel like can have ways to sort of manage their Risk by creating a portfolio so even if they're exposed to certain types of you know crop failure in certain places here there are some on side cells um on an aggregate basis there are still ways to manage manage that and there's also ways to find Insurance to protect against things like coppelier so those are a few other types of challenges that

we see in Asia and the one last thing I'd add I mean and and I think it's it's excellent that like in Nigeria like there there is um land holding by the farmers what we're finding in some of the markets we're looking at is the small holder Farmers um don't have title over their land and that that also is a barrier to them lending because typically financiers like to have some kind of hard collateral so if they can't even borrow against their lent um then that is like an additional challenge so those are some additional areas that we're seeing um coming from Asia that's brilliant we're getting a good overview where you think of the

agrofinancing and the issues in the in the industry across across geographies well Legend do you want to add something to the sort of prognosis of the city of the sort of diagnosis of the situation or do you want to jump into you know how blockchain and and blockchain related Technologies like DFI can can help address some of these issues yes I think I'll jump right in because Ernest and Joanna has kind of expressed the situation in a very very nice way and I and I'll pick from somebody what they said and he spoke about the sdgs with reference to the hunger problem and

the poverty problem and you are not interested in us spoke about the issues in agriculture that if we solve it we can solve the ongoing poverty problem and I like what you said in Joanna about the intermediary layer the question of pulling risk and depression of portfolios and those three areas is really where blockchains play a very very beautiful big role when we were co-creating this program and I use the word called creating very carefully with usaid and Co and other partners such as some commercial banks that join the program like first city Monument Bank in Nigeria you know the credit guarantee agency are minimum the

question we needed to solve was that when you take a look at a small world a farmer by himself is not viable for any form of financing so question is how do you now make that small weather farmer viable and the things you needed to solve were one the question of identity is this person who they say they are the question of business profiling is the guy farming one nectar two hectare and then the question of return on investment what year do we expect immediately you can do those three things you can actually use the power of blockchain to create that farmer as a digital token as an nft to create now a small equally Nano pitch

for that farmer you know in fintech you always hear about pitches or fintech fundraising proceed round seed round series a but agriculture is filled with millions of entrepreneurs but nobody in the world sees them that way and in natural facts you can use blockchain now to create portfolios of these Farmers for their own seed rounds you know and it now becomes super super interesting so so we see um blockchain as an infrastructure and Beyond cryptocurrency solving that particular problem of identity of portfolio management of aggregation together because if a man investor

investment fund structured firm let's say New York and I want to deplet 10 million dollars there's no way I'm going to fragment my 10 million dollars into 800 but if I saw a portfolio of one one million dollars each with different risk profiles then they become investable and I don't worry too much about the underlying layer the intermediaries solve that problem and and I'll talk a bit more about intermediaries basically I mean when I'm listening to Joanna and from the co-creation exercise that we are taking like very soon to make blockchain fulfill its promise of solving these problems you need all

kind of intermediaries you need what I call the farmer aggregation intermediaries that's the guy that puts a lot of farmers together when you finish that now you need the monitoring intermediary that's the person in blockchain what we call a validator node or an oracle the person that says this portfolio you can trust it it is what it is immediate if you if you get that kind of intermediary we begin to succeed and and fortunately in the experiments we are running in Nigeria we have such intermediaries one of them is a company known as crop ID very interesting interesting company and then if you solve that layer now you cannot solve the other layer which is how do you now present this as portfolios large ones more ones Nano

ones to different categories of investors and get them to to kind of invest and I feel that when if we're able to solve this we'll make now agriculture a functional Market I always say when you take a look at other markets the market for airplane tickets it works when we take a look at the market for mortgages it works when you take a look at the market for automobiles cars it works when you take a look at the market for clothing it works when you're going to take a look at the market for music it works so why is agriculture Market not working when in places like Nigeria this is the 150 billion dollar segment how come it's not digital how come it's not having an effect of one trillion

dollars how come it's not a job engine and you you realize that it's really a combination of um the architecture of the marketplace the kind of infrastructure that supports it so that's what I'll say I can so that I don't dominate the conversation yeah again we're getting a good sort of a Topography of the the specific issues and some of the ways to answer them but let's um can we perhaps uh dive more into the specific issues and now more precisely uh how blockchain can solve those specific issues so from the conversation until now we talked about the need for investment and inefficiencies and fundraising we talked

about the transparency of those of the use of funds um we talked about supply chain issues and risk related issues uh like Insurance uh lack of banking like the inter linkage between the different parts that need to come together so uh off takers insurance providers banking partners and these intermediaries um does anybody want to pick any one of those specific topics that um um that are interesting here Ernest is there one that seems to you more anyone actually that seems to you like something different is happening thanks to uh blockchain technology

oh yes um I will want to look at the risk aspect and how these technology is addressing it yeah because the thinking is that if you want to really invest in commercial Enterprise you have the format formal financial sector to approach and in a country like Nigeria we have a very Lively uh you know commercial Financial Market however the issue of risk and wages perceived and to some extent they the way the economy had grown from a trade uh Market to from trade to service

sector without considering uh real sector development creating the fundamentals it has kind of uh disoriented the money market quite frankly and so the each time you want to redirect attention the first thing you hear is risk and in the financial system the way you manage risk sometimes it's not so much about the comforts you lay here and there are as it is about the structure of a transaction and so if you design a financing product in a way that the structure in itself mitigates risk if you really want to support that Enterprise you can do so

safely and so the the commercial Market in this space has not been very very creative in structuring transactions in a way that it will be safe so we don't continue to think about those limitations and shortcomings of the small Buddha Farmers since we know that these people are critical to our economic system so the blockchain system here now has been presented on the agrify comes with a structure that takes care of risk What does the farmer really need does it need to touch cash it doesn't so you are not at the Messi or the farmer as to what he will do with cash

an event that you this box cash to him what the farmer needs is inputs services now like Balaji has said how much do we know about this farmer and in this day and age where we have uh the internet is it possible to geolocate this farmer and his assets in such a way that at any point in time you know what is going on um on the declared as a production base of that Enterprise of that farmer that is possible so reducing the number of food soldiers that have to actually be at a in neck or this entity so as to make sure that you know that the mercy

of that entity so we have that system here where farmers are properly identified their assets are geotaged and these are documented now what about administering the inputs we have an extension service provider that has track record that will not only show farmer the best way to apply the bundle of inputs to achieve a certain yield Benchmark and if you achieve that yield Benchmark your return on investment is assured and your capacity to service any obligation associated with that Enterprise is also assured so we have such entity in place

and then what about the the market yes because you could do all the production and there is no structural optic no um you know organized way of getting uh commensurate value for produce and because the market is in this array the value chain is not fixed now we have in this arrangement committed industrial end users and operators in the food industry and processing industry who require the produce of this entity and who require Assurance of their supply chain to make sure they utilize their industrial installed capacity efficiently

now we also have Partners who play specific role according to their normal course of business insurance is because plan and structure everything as you can random events can happen and in these days of intensified climate risk circumstances Insurance becomes very critical so is there an entity like that that entity comes in and plays its role as it should using appropriately structured Insurance underwriting products so with all of these aligned you can see that the transaction structure that puts Capital at the hands of the farmer to enable him go to farm and do what he's supposed to do and generate the produce that would reward

his invest his Enterprise and of course uh deliver a return to whoever is investing in that smallholder farmer all of this are taken care of in this structure so where is the risk that's the question and of course to make it to bring it closer to the uh you know conventional um money market situation as possible there's also a layer of credit risk guarantee so the risks are taken care of by way of a structure of this um this uh value stream such that one can see how fund comes in and one can also see how funds come out so there's cash flow assurance

and like biology was saying it is this cash flow assurance that guarantees success in all the Enterprises he mentioned Aviation telecoms trade whatever it is it is that cash flow Assurance as a result of a structured relationship in the value stream and the market that assures that those Enterprises are working and that's what has not happened in agricultural financing uh we we keep talking about smallholder Farmers we know how vital they are but nobody has taken that PIN to structure them in this way so as to see end-to-end the cash flow assurance that ensures that whatever goes into uh that Enterprise comes out safely so this is where agrify makes the

difference and so when the usaids project feed the future uh project in promoting Business Solutions that will enable Farmers have access to inputs and services when we came across this initiative it it's it it's flashed as a model that is what projecting Beyond Nigeria and indeed globally to solve the problem of the smallholder because uh to a large extent we find that their situation uh is like the same in most areas around the world um what what thank you very much Ernest

I think what would be very helpful uh is to get into a little bit more of the details of how projects work um Jonah would you like to tell us a bit more about um how how the setup works on our on your side and what are so then we can you know also talk about agrify and put these together and see if there's some similarities and differences in in the way they operate yeah thanks um I was going to say I think there are a few layers to this first I I want to be clear that um at least from where where we sit like uh blockchain does not solve all the problems with smallholder farmer

financing I think um there's still a lot of problems but uh but partly because we don't really live in a world yet where everything is on blockchain right if we lived in a world where everything was on blockchain or everything was programmable money um then yes you know you you could really have that end game that um I think the original crypto native defy has painted that picture for us right because if anyone has ethereum anywhere in the world we don't need to know each other I can put five ethereum in a smart contract um the contract sets up all the terms and people who don't know me can pledge to it and they know with 100

enforceability that that they're going to be able to get that back um what we lack in the current state of affairs um which is why we have to start working with these intermediaries and I'll go a little bit into how we do it but then there are obviously still limitations right um uh is that not all money is on on on chain right so um if we were in that situation you could have a farmer in sulawesi say you know I want to borrow one thousand dollars for like a three-month Harvest and they could borrow it be very very clear about the terms under which they would repay it and you could control all of those things and make sure they don't like sell it anywhere else um and you would have that kind of

enforceability I think right now that's still an area that is um not fully there so how we've dealt with it is um for us we don't um I I think where uh torna and usaid I think with like this very exciting project that you guys have put together um and uh you know you guys have put more of the pieces together um what we do at aruca is a little bit more focused on the Capital Market side in the sense that um what we found in Indonesia and India is that there are a lot of um what I call like kind of digital cooperatives right so we all know

traditional cooperatives um you know they're groups of smallholder farmers a lot of times they do organize the farmers in terms of figuring out the projects and then like arranging the sale to to corporate um what has happened interestingly host uh that digital transition in India and then also post the pandemic in Indonesia especially um is there been a lot of digital co-ops that have emerged and and those solve three key issues actually for that are traditionally like a small Department space which is inputs are too expensive and the price on sale is not very good and then they don't get a lot of technical assistance to transition to sustainable practices to like you know

Best in Class um ways of improving their yield and related things and then relatedly also they don't have access to credit so where we come in is we partner with the platforms that are already sort of going out and building these digital Footprints but they are the ones who in the context we are working in they're the ones who are getting the off takers they're the ones who are procuring the inputs they're the ones who are putting the product plan together they're the ones providing the technical assistance and what we do is we partner with some of these largest guys who are now saying okay we want to do more embedded financing to the small holders in our supply chain and that we have organized

in this digital form and established a digital footprint for and then we partner with them to use those digital Footprints plus um you know we partner with them to make sure they're validating like uses of funds um so that there's some traceability and then we bridge that into Capital markets the other piece we do you are experimenting with as well is to bring down the cost of credit I mean um you know I think we we are living in an environment right now where the cost of credit has gone up significantly in the last year plus right um so in in a setting where mid-market small or more really medium-sized businesses

in America are paying 12 per annum in USD on credit then it gets trickier right getting like Affordable Credit to smallholder Farmers who at least for a global financier who is not on the ground who doesn't see the power of some of these ecosystems that are being built up um it's hard for them to get their heads around like why there's no risk premium to the smallholder farmers in Emerging Markets so um what we try to do uh also with these digital Supply chains then is to work with them on on pulling out um environmental and sustainability uh you know environmental and social so

es more ens of the ESG um relevant factors and and data um as much as possible at the farmer level and if not possible at the ecosystem level um to then provide that to Global Financial here to care about that and are willing to provide lower cost of credit for that so um so how we work is very classic embedded financing we we find these digital co-ops or ecosystems that have very much digitalized and we partner with them on embedded financing into those Farmers so it's a slightly different approach um I think the other thing we're finding and it could be very different in

Nigeria is that a lot of the target segment we're dealing with is still actually not even online right so a lot of them are very very rural far out places that don't actually have that great internet coverage even if the overall country they're in has gone quite far on digitalization but that digitalization is still very very concentrated in large cities and the actual internet coverage drops off significantly once you get like a bit further out from the city so um again like these um intermediary digital co-ops that we work with then become a huge part of that bridge in terms of they look like they'll set up you know like a like a village Hut um where they work with the farmers and

start building those digital records with them so the other piece we are also trying to build in but this is a work in progress is uh partnering with on the ground ngos and that operate in those spaces who can partner with us on some kind of technical assistance or like ens like data validation um for for segments that they we are concerned with and so uh so that that's the way we do it very uh you know embedded financing with ESG and but we but we partner a lot with these digital co-ops um our thesis is sort of you know at least in the markets in which we operate um I think we're about probably like

three to five yards out from um like Farmers you know being fully ready to use like mobile phones and then maybe even like crypto wallets um I think different markets have different levels of Readiness um but that's what we found in the markets we're working with which is why we take this approach um but we've built our blockchain based infrastructure in a way where an application layer we're evm compatible um and so we've built it in a way that's modular enough that when uh the behavior is ready and the internet infrastructure is ready or even just like you know we're starting with like mobile phones and there's the ability to then extend what we're offering into farmer level while it's but at this point uh we we

you know we start where we are uh where we can solve the problem so that's what we have focused on uh and and that's the exact model we're taking for all the platforms we're partnering with um so we're not as much doing the like building of the ecosystem if that makes any sense um that's very interesting if I just correct me for my own understanding it feels to me from what you're saying that you're and we'll get into agrify later for the viewers to make it more clear but it seems that you're operating on maybe a higher level of aggregation like the digital cooperatives that you talk about could be agrify pools or agrify itself they could yes

yes exactly and this is actually thank you for picking that out and um I I think I I alluded to it like briefly earlier but and and what I'm finding actually and just general conversations with the market is that um a lot of people actually don't realize like how much like like you need both right um and and and yes we want to move away from unnecessary intermediaries but there's a certain type of intermediation um that is needed because there isn't very good infrastructure um especially around like Credit Data and um just access to the internet um for this target segment so uh yes our what what we are focused on at aruca is

really building that Capital markets layer that would partner whether it's with agrify or with um just like supply chain platforms that have become digital um and then and then we Bridge some um in a fairly targeted way into Global Capital markets great great um well actually now I think it's a good time to for you to explain basically how agrify works and how it addresses some of the the problems that we talked about and and andrena has put out some really powerful keywords there I think you can pick up on all the way from you know wallets to connectivity to cryptocurrency to there's many things I

think you can you can relate to um yeah great great so let me speak a bit about how I graphite works but I'll start from what I call what is foundational and I'll quote the great Peruvian economists and Andrew DeSoto who wrote a book The Mystery of capital and he was trying to get people in the global South understand that creating worlds in the global South can look mysterious but it is not and he was trying to say that in the global notes people have kind of Forgotten what it took them

and the structures they put in place to create Capital all wealth for everyone so my first point is there is a social trust that makes societies an economic economies and ecosystems work those that social trust expresses itself in Goods of conduct and in laws when people like Satoshi and vitalik came up with the idea of blockchain and smart contracts the spirit of the idea was that the social trust that is invisible can we write it into code so that economies markets and interactions can work without us depending on somebody to

believe in a certain way so that's my first um Foundation let's call it the philosophical bits the second bit of a foundation is to understand the graphite you have to understand chart five traditional file and D5 and then realize that what we call agrify today is actually hybrid file it has taken the Best of Both Worlds to achieve it outcome and what problem which is my third point is agrifice solving and honeystars alluded to it very well it's really democratizing assets to markets especially Capital markets for those that will never have dreamed of being

able to access that capital and it's doing it by not putting the technology in front of the farmer but the people and the solution in front because when I'm a farmer in a rural Village in Nigeria what's my problem today farming season starts in four weeks I have no clue whether I will have enough money to plant my two to three hectares of land I have no clue whether the inputs will even arrive when I want it and I have no clue whether I will sell it so what agrify does is you want to give the farmer the assurance that you can access the capital that you want

there's already a buyer waiting for you and input suppliers are available to deliver them to you and for the farmer it's a very simple construct because of Partners like usid feed the future and many more who have done a lot of work on the ground in terms of extension they've done what I call the hardest work which is let's call it um physical profiling so that we can know where the farmer is who is what are social relationships and who is the extension person serving them on ground immediately that work is done agrifice takes that pool of data and brings them on Jane at this point in time the farmer has not even done anything then the extension partner is the one that is interacting with the family

and fortunately we're in the part of the world we are the farmer might not have a smartphone but they have a future phone and there's a very popular service channel in this part of the world called ussd unstructured supplementary service data which is like browsing in a very simple way like SMS browsing that's the in in the LEDs of the mobile networks there was SMS chats what we used to call SMS charts in 2005 7 is what they call ussd today for the audience and because many of the farmers are able to do that it means they can interact with a digital wallet and the farmer is not exactly interested

in what is inside that wallet whether it is a token it is what have you the farmer needs that wallet as one a store value as its connection to actual bank accounts and agent Network in the real world and the means of keeping record and track of what is going on with respect to him so I agrify does that for the summer and then that wallet is the touch point for all the doctors in the ecosystem from the guy that will supply inputs from The Gather or provide extension from the off Checker that will settle his loan it's that wallet that is at the center of everything and everybody is interacting with the farmer with each other from the percent

of social actress which is when an ecosystem like anesthetalia that is highly risk and accountability is very clear and that's why the question of um the validator note that company I mentioned earlier called property that they come into play that serve as the equivalent of Oracles in a pure web 3.0 world and I agree with um Joanna and this is where I feel that in web 3.0 there's more than 600 to 700 years history of financial systems in the world today we can't just throw away everything we have to kind of take the best of the new knowledge

which is the power of web 3.0 to allow people from anywhere in the world to interact together in a trustless week in a way that there are smart contracts that enforce the rules of the game I need to plug in actors in the real world we make sure that those interactions they are what we say they are you know and that's what I mean agrify really is and I hope I've kind of described it in as simple as a way as possible so if you're a farmer and let's say you are somebody in let's say North Carolina and you've got 500 books that you would like to invest in a nano investment in Africa agrify is your bridge to that non-investment

conceptually and if you are a structured investor and you've got a million dollars agrifa Aggregates all those Nanos to become no longer Anonymous but they become not even micros they will come now megas portfolios I mean that's how I describe it thank you I can see in your last uh in your last sentences you answered the question I was going to say because yes you described the farmer side of agrify you hadn't really described what it means for investors and people looking to uh to to finance uh farmers and maybe trying to put together like a lot of the concept that I picked up through the the things that all three of you

said concerning agrify the one thing that's very interesting to me is that as you said it's it's a it's a intertwining of traditional finance and decentralized finance through this uh platform of intermediaries so it's an ecosystem around built around farmers and the people who enable their financing so those people are weather insurance providers those people are credit guarantee institutions those people are extension service [Music]

food aggregators traditional Banks where some money does need to Flow In and Out input providers so people who sell seeds fertilizers uh mechanical uh Goods machinery so these are all the people that are brought together in order to facilitate one simple thing which is to connect an investor and an investee that don't know each other and that cannot trust each other and at the same time now if you just step back and look from a blockchain and purely decentralized Finance perspective

like black Journal was saying before you say but wait a minute there's a ton of intermediaries here like how is this decentralized like this doesn't make any sense like I don't want like the point is to have no intermediaries but I think that's as as Joanna said like everything is not on chain today that's something that you have to remember so when you're connecting and this is why decentralized Finance has been having a lot of problem creating sustainable yield that comes from actual economic activities because on chain is something the economy is somewhere else and bridging those two you do need a set of intermediaries the question is can you have not one intermediary not one person not one company that you have to trust

but a diffuse system that is basically um distributed and as such you know in the range of of decentralization and and in time like John I was saying you can get to more and more automation as the kind of things that we're doing with with agrify I'll just use one feature that I found really cool is that farmers in agrify they have a they have a wallet so a blockchain wallet that's based on on the tournament blockchain and they have a matching bank account but they don't need to go to the bank to open that account it's because we have we have banking partners and since they connect with

credit guarantees institutions they need to to to have bank accounts so they can just match it through the kyc system that we already have thank to other partners so you see I think this is the really interesting part is like when you start to put together a lot of actors in an ecosystem and then you can trade create trust scalability and you can Preserve both revenue for farmers agrify is projecting something between 85 to 90 Revenue retention for farmers and at the same time offer very interesting yield then then becomes AG um that you can aggregate like Joanna was saying before again because you know um investors need diversification

um so this is I think the Beauty and the sort of alchemy that you can create putting all these all these people together I'll quickly uh take a look at the chat I see there's already three questions maybe you can start taking some questions okay we have somebody who is asking for a partnership that's uh maybe not the best place to talk about that but feel free to just reach out to the panelists um I think everybody is on LinkedIn here so depending on who you are aiming for ignifix please just uh just contact us um we have somebody who's saying for the farmer what is the advantage of e-wallet Slash tokenized approach versus classic

online payment system I think that's a really good question who who wants to take that one what is the advantage of using a new wallet and a tokenization process instead of just a you know a payment system like PayPal for example or anything else I mean I mean Joanna already answered that majority of farmers are not on PayPal they are somewhere else yeah and the infrastructure uh where the farmers really are these people want to impact where they are the access to basic banking infrastructure is another challenge like this is one advantage of

of decentralized finance using the wallet system the ussd as described by bolaji that way you cut out all those brick and Mortal challenges that holding the farmers away from the former Financial system oh I was just gonna say um I mean the the guys we were working with uh are not um I I think we're when we we aren't giving them a wallet so it's a bit different because we're more focused on the capital markets layer I mean at the one thing that I might add in this in this question here is that

they are the the limitations of the traditional payment systems are the inability to bring together all those partners that I mentioned before and to create an ecosystem right you can just send money and transact and transfer but you can't say like you can't bring in together people who have different functions so when insurance provider who needs to put a collateral or a food aggregator who will pay a future agreement on the on the price so who who would put down collateral as well for a loan so that's the really big difference that's the programmability of money and the creation of the ecosystem I think that's one very big big difference on top of what others said

um if we could also emphasize that actually those other players because of their um their position in the um you know economic system they are able to integrate to interact with the former Financial system they and of course you have a formal financial sector partner that's also warehousing uh that serves as a host um to the payments and the settlements so like it was described there is uh this this is a hybrid which involves the real life of former Financial

structures and this uh interface that enables the small order farmers who are kind of financially excluded to eventually come on board and get progressively integrated into the financial system of course that's the end game it is not to let them remain where they are as they participate in this and have access to Capital increase their economic um activities and their outputs the progressively creates wealth at that level and of course they feed into the former Financial system and begin to take advantage of all those structures

progressively um so there's another question here this is also a very interesting one I think it's it's specific to Nigeria but I think it it links to other markets uh someone is saying considering the Nigerian Central Bank CBN policy on cryptocurrency is there's a is there a way uh you hope to bring funding to a Nigerian smallholder farmer first of all go ahead apology please yeah that that I can respond to because it's kind of important to understand what did CBN ban CBN did not ban blockchain as an and that's why even the Nigerian

government itself approved the national blockchain policy I wish spirit is to say look you can use tokenization and its power to perform the economy what the Nigerian government ban was crypto speculation assuming we said we wanted to not create an agrified agrify cryptocurrency that people will be trading in the market who will be really running and fall of the law but the to use the technology to solve real problems for people Nigerian government didn't ban that so that's a that's it it's a kind of materially very different construct so aggraphy is not about cryptocurrency trading it's about using blockchain as a fundamental infrastructure or using the

word the there was a phrase you came up with a few days ago regarding um technology I think it is is this Society changing technology I'm trying to remember the phrase general purpose technology general purpose technology exactly the use of blockchain as a general purpose technology is not banned by Nigerian government so so so so so so I think that's the what I would like I don't know whether you have anything to add I can't know anybody else I mean it's very similar in Asia like we are not um having Farmers take loans in Bitcoin or ethereum they're taking loads and hard currency and we use blockchain as an infrastructure for transparency and programmability

um so very very similar to tornet uh and and I think that that's really where I think we're all focused that's yeah beautiful summary I think that's also some of the limitations of the connection between uh defy and the real world um yeah this is it's just not about cryptocurrency um one more question here we have how does agrify hope to bridge the technology Gap so I'm not sure exactly which technology Gap you are you referring to because I mean there are several several um is their nestorable Edge you want to address this one I mean the way I would think about it is really because there are many ways to

think about it and I'll draw on our experience when we started dealing with like program 10 years ago so that was a very interesting experience well we said we're going to deliver credits financial credits to Farmers mobile warnings and at that point in time if you registered 100 Farmers Only 35 this was 2011 headphones so the very first year 2011 and 2012 we could only achieve like 30 participation but the minute Farmers understood that okay my phone does more than the pause the partition rates jumped from 35 to about 52 for 2013 2014.

arriving at 2016 more like five six years later you had a situation whereas if you register 100 Farmers you could be sure that 80 of them had at least a basic future phone so I look at technology in the Royal areas as a Continuum I look at it as technology for communication and accessibility I can be reached you know then there's technology for for higher productivity you know the two are related but not necessarily the same so today what we see is that technology for higher productivity high yield seeds high quality fertilizer organic fertilizer that technology and its knowledge is gradually redeemable

farmers and the technology for communication is what I call a lagging indicator because as farmers get more yield they get more money and then what is the first thing they do they send their children to school they try to upgrade their Communications infrastructure so that now they move from basic phones to low cost future phones that's that's so manufacturers then if the animal income the moves really slowly so like in America it might take somebody in this part of the world 10 years to reach an iPhone you know but in three years they will move from a basic phone to a low end smartphone like the new ones coming out of Nokia these days that are running Kairos OS that you can do basic WhatsApp and

things like that I don't know whether there are a lot of them in Asia but in this part of the world there are those small phones that you can do basic social media there there is a lot of that in Asia I mean what we are finding though and the reason and maybe this addresses the uh Anonymous attendees question um because they've clarified that it was technology Gap in terms of access to the tech devices I think access to track devices is one I think as Balaji correctly pointed that I think there are a lot of low-cost tech devices that are available I think the other thing obviously you have to worry about is a lot of these farmers are in areas without internet coverage right so even if they have a device um they're not

going to be able to um have reliable enough access to the internet for for it to be a reliant and then there are actually so if I address couple of those things first um in terms of where we are in Asia and and the partners we're working with um we at aruca again because we're the layer focusing more on the connection to the capital markets and one thing I didn't dive too much into is um another part of how we are using blockchain is actually to enable bottom Blended financing at scale um and I'll just throw that in as a little teaser um for maybe another conversation um but you know as you guys might be familiar with some of you might be a lot of times how we unlock

Affordable Credit to um newer markets to markets like this where I think what we're doing here I think all of us are trying to figure out is how do you establish to the market the appropriate pricing for the risk reward that is now available through agrify and through these digital ecosystems and I think that's that's a that's something that all of us are aiming to work towards and one of the pieces that usually gets us there is often um Blended financing structures where someone who cares about the impact or development outcome um takes you know some some junior or or like a risk piece um that that is tied to some kind of

um sustainability or ESG related outcome and and and you can operationalize that at scale so so those structures have typically only really been done for you know 50 million dollar transactions and up and and now with blockchain you can actually do it for as small as five thousand dollars um at a farmer level kind of data so that's one part actually that's quite powerful um to the point of how you reach out to the Last Mile in terms of tech devices and and all that um Balaji and and everyone else in the panel talk a little bit more about how they're doing it with tournament um but for us um we we're focused on the ecosystems the ecosystems that we're working with are the ones who basically go into the villages and they work with

the with the often off-grid Farmers um but I will say that the technology in general is at a level at which you can start dealing with some of those things because um for instance our blockchain Engineers on our team have actually previously worked on a blockchain based wallet um that is compatible with uh non-internet connected areas and so what they do is device to device transfer like a check space system um and and you can do device to device transfer until maybe like once a week you go to the Internet cafe that's maybe like you know three hours away and and you sync all the devices at one shot um you know these types of Technologies are already possible they're available

um and uh so yeah it's it's it's actually a really really exciting time to be building out this type of and and if I may also complement from our space here in Nigeria the fact is that we have met some considerable progress really with respect to the wallet system and the commercial financial markets here is quite active and you have a lot of agency banking solutions that run on point of sale stamina house and so in the rural communities that at the at the last mile really and in fact

um they former minister of agriculture in Nigeria who is currently the president of the afdp had actually challenged us at a certain uh with this issue of getting inputs and services across to the last month he provided desire agricultural inputs and he kept asking that question if we can take Coca-Cola or um the the the the the the car the recharge card for a future phone if we can take it to the cave in the village why can we not create a structure by which we can take fertilizers seed crop protection preparations and other such services to the last night to the

Village uh to that remote Village and people are doing these things with respect to the call cards the soft drinks and such things entrepreneurs micro smaller middle entrepreneurs are doing distance without relying on the big infrastructure of the public sector so if this is happening with respect to those things why can it not happen in agriculture that challenge the minister Dr Kimmy additional deep through it and it it's cooked on and people responded to that that challenge so we have uh this distribution system that has been made possible by a very vibrant commercial banking system like I

said we have a lot of this agency banking Solutions and points of sales Terminals and then this layer of private extension service providers themselves they are uh you know the layer that is closest to that uh isolated or that this past smallholder for my farm farming Community now these entities themselves have access to Internet and relying on them and their closeness to the smallholder from The Last Mile and taking advantage of this point of sales Terminals and these other structures the language of wallet system is not totally uh foreign

which is why what we're emphasizing at this time from the extension activity point of view is agricultural technology have we convinced persuaded the farmers to shift from traditional practices to the use of improved inputs and services that are not only you know environmentally safe but also ensure uh guarantees reasonable output to reward their Enterprise have we succeeded in conditioning the farmers that this is the way they go and the answer is yes so how do we Finance this so that they can adopt what they have now come to accept and using this private extension service providers an example

of which was given the crop I.T and the likes of that we're able to um we we are confident that that issue of internet and the limitations in terms of Technology at The Last Mile we can Bridge it so that the real objective of putting improved agricultural technology in the hands of small order pharmacies achieved and this is the excitement we also find in the agrify model that mobilizing capital and working through this pathway of you know the the the mobile payment systems that are on ground the wallet

systems and this extension service providers we can make that connect safely such that Capital can be deployed and safely recovered thank you very much Ernest I think we're getting close to the end um do you have any final words no from me just to thank everyone on the panel and everybody that joined thank you so much for joining I mean this has really been awesome greetings all the way from Abuja Nigeria um yeah likewise thank you for organizing and thanks everyone who uh joined for happy to connect um again our focus our work is focuses a little bit more institutional at the stage but

we're looking forward to building a community that cares about sustainability linked and Affordable Credit to smallholder Farmers um in Emerging Markets we are starting in Asia and we're always happy to be in conversation with like-minded peers across the globe yes so thank you very much uh akan for organizing this and for the audience and the participants and the USI defeat the future extension activity is super excited about the opportunity of alternative Finance yes creating an alternative Pathway to deploying Capital safely where it is needed we are excited about this

opportunity and you can be sure that will give it all the support that it needs so that it becomes a model to be proud of that we can export to other parts of the world that's our goal fantastic I want to thank the three of you for your time um and and and this um really rich conversation um thank you to the people who who came to join the conversation um maybe one thing that wasn't said clearly is that um biography is launching now so in June the first pools uh the first landing pools for uh selected Bachelor farmers will be live so uh you can connect with us on

different sites and socials that I that I posted if you want to follow all that and yeah thank you all the three of you like Ernest you just said we're actually you know together at whether that is at the Capital Market stage or at the very um on the ground stage of connecting these actors we're all together thinking about the future of finance and uh and it's it's really exciting to be here and talking with uh with people like yourselves working with people like yourselves so yeah thank you everyone and uh thank you have a great day thank you Dubai thanks bye