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How blockchain and decentralized finance can feed the poor in Africa

A cryptocurrency company aims to tackle food poverty in Africa with an ambitious mobile voucher scheme that will give rural farmers better access to finance for growing crops.

KamPay will initially draw funds from a lottery network operated on its digital wallet soon to be launched, before expanding into larger decentralized finance pools, CEO Chris Cleverly told me in an interview.

“There has always been a culture in southern Africa – certainly Zimbabwe, Zambia and Malawi – around this voucher system,” he explained. “The government used to give coupons to individual farmers. The farmers would then take the voucher to a store to get a subsidized price on their fertilizer.

“For a moment [this physical voucher system] was very successful … but eventually got pretty corrupt. By putting this kind of system on the blockchain, the element of corruption is eliminated.

Blockchains use peer-to-peer technology to record and validate transactions on a shared ledger, eliminating the need for individuals or businesses to act as trusted parties.

Bitcoin became the world’s first blockchain when it launched in 2009 with the goal of revolutionizing financial services by establishing a new form of digital currency separate from commercial banks and central governments. Thousands of other so-called cryptocurrencies have been launched in its wake – but blockchains don’t necessarily need to perform a monetary function.

The IATA airline industry group, for example, uses blockchain technology to validate covid-19 tests and vaccine status in its Travel Pass application for passengers.

And Cleverly thinks this kind of innovation can bring fertilizer coupons into the 21st century – not only ensuring greater transparency, but also opening the door to a wider range of support services for farmers.

“Essentially, it’s a micro-finance solution where we have an agreement with the supplier of the product, which is usually seeds,” he said, referring to KamPay partnership with Africa Grain & Seed. “We choose the seeds. We choose the plants … [The farmers] borrow money through the voucher system – which we lend – and it is only paid back after they have grown and sold their produce.

“Then when it’s paid back, they take their profits and can stay in the token ecosystem… for other services like education and insurance. “

He said borrowed funds are subject to an initial “lock-in period” to minimize credit risk and ensure the voucher system is not abused.

Once the profits have been distributed, however, the farmers are free to use the profits as they see fit – on or off the platform. KamPay’s wallet will allow users to store the company’s own cryptocurrency, Kamari; other traditional cryptocurrencies, such as bitcoin; local fiduciary cash balances; and potentially stable coins.

KamPay is also looking to cooperate with Tingo, an agro-tech company that rents cell phones to Nigerian farmers so that they can access goods and services at competitive prices. Cleverly became president of the Tingo group last month.

Lottery funding model

The loans will initially be funded through a series of lotteries operated on KamPay’s digital wallet game portal.

Lottery licenses were obtained in seven African countries, as well as sports betting licenses in 12 countries and digital casino licenses in nine countries.

Pressed by the apparent contradiction of using socially harmful gambling services to fund socio-economic development in Africa, Cleverly insisted that sports betting is “certainly not at the forefront” of the model. commercial. Betting and casino licenses are often associated with lottery licenses on the mainland.

At the same time, however, he championed KamPay’s plan to include entertainment services such as live sports streaming and mobile games on the platform.

And he insisted that the lottery model, in particular, has a proven track record in creating employee benefits.

“A lot of these questions were asked when the lottery first arrived in the UK,” Cleverly recalls. “If you look back over the decades… the Olympics wouldn’t have existed without the lottery. There are so many other things that would not have existed without the lottery.

“The lottery system is sometimes referred to in quotation marks as an ‘imposition’ – because it actually allows you to aggregate sums of money to do social good. It also allows you to predict the amounts you need to lend. So that creates a cycle, and it’s a stable cycle. You can almost absolutely set the profit levels in a properly run lottery.

Another bonus: the lottery system “is and remains the largest customer acquisition model in the world”.

Longer term, Cleverly said KamPay’s “big dream” was to fund its loans with a portion of the $ 80 billion currently spent in decentralized finance (DeFi) markets.

Lenders and borrowers on DeFi platforms follow the same principles as traditional market players: loans are secured by a borrower’s guarantee and issued at an agreed interest rate with certain repayment conditions.

What’s revolutionary about DeFi, however, is the mechanism by which these agreements are managed. Rather than relying on third parties to perform credit checks and secure or pursue repayments, DeFi uses blockchain technology to enforce and block loans – in particular, by deploying “smart contracts” that bind people together. lenders and borrowers at their word.

The birth of DeFi means that vast amounts of cryptocurrency wealth are deployed in this way for speculative return – gaining the interest of traders who use the funds to reinvest in the cryptosphere.

“That’s not really the purpose of the cryptocurrency promise,” Cleverly noted.

“What he was supposed to talk about was [establishing] how we can all support humanity with value – equally distributed, or distributed in ways that can be just as useful. And this has not yet been achieved … The dream must be to create a DeFi solution that allows you to achieve real performance.

After launching the lottery model, KamPay ultimately hopes to offer peer-to-peer loans that will generate income for both lenders and farmers – without financial intermediaries taking a share.

Africa in the lead

And while this kind of decentralized financing can transform countless industries, Cleverly believes that African agriculture is the first to embrace.

Farmers on the continent have the greatest need for financial empowerment, he said, as well as not being encumbered by legacy infrastructure that too often has a chilling effect on innovation. This gives them a clean slate on which to experiment with new, more democratic financial models.

“Technology is taking a leap forward,” Cleverly insisted. “In the West, you have a very centralized banking system and very aggressive against change.

“[In Africa] it’s really about building from scratch. So what would you choose? Would you put in place the systems that currently exist for our financial services? For our lawyers? For our accountants? No you wouldn’t. Would you like to set up the services that already exist in Europe – [ones] regarding payment gateways, salary payments, insurance payments? I mean, you just wouldn’t. You would start with first principles.

“The first principle is, ‘How do we support farmers to feed as many people as possible?’ This is your first principle. So you will use [mobile] technology that allows them to stay in situ, where they are, to do this agriculture. You are going to empower them to do what they do best and support them.

The penetration of smartphones in Africa is already high thanks to the young demographics of the continent and the mediocrity of fixed telecommunications services. Mobile banking apps and digital wallets are also extremely popular because about two-thirds of Africans are unbanked.

This partly explains why Africa’s bitcoin adoption arguably highest in the world.

Take into account the double-digit inflation plaguing many African economies, and it’s easy to see why the continent’s citizens are starting to turn their backs on centrally-governed financial models.

“Centralization hasn’t worked in Africa,” Cleverly said, “in part because the center hasn’t actually been in Africa. It was in New York or London or Paris or Beijing.

“If you want to make hunger a thing of the past, the way to do that is to put the farmer at the center of everything – keeping the wealth out of the hands of the few; distribute it among the greatest number; and have the decision-making processes written in code from the start.

“The farmer can be the hero of the story if you build around the farmer. And that’s what we’re trying to do. We are looking for ways to support the farmer, not to exploit the farmer.