Reward a Farmer

Globally, there are 12.5 million smallholder coffee farms. It is estimated that 44% of these coffee farmers live in poverty (Enveritas, 2019). In Ethiopia alone, over two million households grow and sell coffee as their primary source of income. The prices that coffee farmers receive are unsustainably low, extremely volatile and represent just 2.5% of the retail value of the coffee when sold at a café (World Economic Forum). These low prices make it very difficult for farmers to meet their most basic needs, let alone save any money to invest in their farming or help prepare themselves against future threats including climate change. These challenges are exacerbated by the fact that these farmers are unbanked, lack access to financial services and live in rural communities that are primarily cash based.

Our solution uses a digital utility token and a mobile based digital wallet to enable payments to be made efficiently and directly to smallholder coffee farmers. Payments are made by down-stream value chain actors (e.g. roasters, cafes) and consumers and are equivalent to 5% of the transaction value. Linking farmer payments to the price of coffee in downstream value chain transactions where it is much more stable and valuable increases the price and stability for farmers. The value of coffee in the transaction between a café and consumer per kilogram is relatively stable and is approximately 50 times higher than between farmer and cooperative, thus receiving even a small percentage of this represents a significant increase in income for the farmer. Farmers can then use these tokens to invest in their farming businesses by purchasing products and services (fertilizer, irrigation systems, advisory services, financial services, etc.) from their farming cooperatives. Additionally, farmers receive 100% of the payments via a transparent and efficient system that runs on the Celo blockchain which provides participants with the security and assurance they need in order to participate

The solution serves smallholder coffee farmers and their families in Ethiopia. These farmers are unconnected and unbanked with little or no existing access to any digital services. They are living in poverty and extremely vulnerable to shocks and the anticipated negative impacts of climate change. This solution provides them with a pathway to becoming connected, improves the price they receive for their coffee and improves their access to the products and services they need to invest in their farming activities. This solution transforms the value chain by fostering trust and collaboration between actors through digitalization.

Our team has been designing and deploying digital solutions in partnership with the very communities that use them since 2016. Our co-founder also spent the first year of the company’s existence living in a rural Kenya village before we began building to ensure we obtained a strong grasp of the communities needs before anything else. Our team is comprised of specialists in rural community development, product development and mobile technology and has now grown to include representatives from 19 different countries. To ensure that we maintain a strong connection to the communities we work with we directly employ field officers in each community and invest in developing close partnerships with local community-based organisations and cooperatives. This human-centered design approach led to AgUnity developing the world’s first smartphone and platform solution specifically designed for first time users living in areas with limited and unreliable connectivity.

So far, 900 smallholder coffee farmers have been on-boarded to the system. These farmers are all members of the Kata Mudhuga Cooperative Union, which AgUnity has been working in partnership with since 2019. AgUnity’s smallholder farmer smartphone and record keeping platform has been deployed to over 2,000 farmers. We estimate 30% of these users live off less than $2 per day and over 90% live off less than $5 per day. AgUnity’s technology is also being used by 2,500 cooperatives through partners such as Fairtrade International.

We are a technology company with a solution that has the potential to transform the coffee value chain and generate significant positive impact for some of the most underserved communities in the world. We have obtained support from large coffee buying companies and reputable research institutions. What we now need to help scale this solution is support in our communications and public relations. We believe the visibility and connections that MIT Solve will provide will fill this gap for us.

This solution captures the value of existing consumers' willingness to pay for ethically sourced coffee and delivers it to coffee farmers more effectively than any existing alternative. This solution leverages the security, efficiency and transparency that blockchain enables to foster collaboration and trust between all value chain actors. By directly linking a portion of the income that farmers receive from selling their coffee to downstream transactions in the value chain, farmers will achieve a higher and more stable price. The value of coffee in the transaction between a café and consumer per kilogram is approximately 50 times higher than between farmer and cooperative, thus receiving even a small percentage of this represents a significant increase in income for the farmer. Additionally, because 100% of these payments made to the targeted recipient in a secure and transparent way, even when they are unbanked, participating coffee roasters and café experience increased demand from ethical consumers. This solution incentivizes value chain actors to be ethical and ensures that even the most underserved farmers are not excluded from the benefits that digitalization and access to the digital economy can provide.

In the next year, we aim to achieve the following impacts through deployment of this solution. 1: Facilitate the transfer of value directly from consumers and downstream coffee value chain actors to over 250 smallholder farmers living off less than $5 per day. 2: Increase the income per kilogram of coffee that on-boarded farmers receive by up to 250%. 3: Demonstrate that 100% of the payments made by downstream coffee value chain actors are received by the intended beneficiaries.

In the next five years, we aim to achieve the following impacts through deployment of this solution. 1: Facilitate the transfer of value directly from consumers and downstream coffee value chain actors to over 10,000 smallholder farmers living off less than $5 per day. 2: Increase the income per kilogram of coffee that on-boarded farmers receive by an average of over 150%.

We have engaged Virginia Tech University to support the monitoring and evaluation activities related to the development, deployment and scale up of this solution. Just last month we funded two representatives from Virginia Tech to visit Addis Ababa and Jimma in Ethiopia. Their task was to uncover and discuss the primary pain points of coffee growing communities and identify where digitalization could have a positive impact. They also specifically discussed our proposed solution with the existing users to understand the impacts it was having and identify any unintended consequences.

AgUnity’s products are designed to accelerate digitalization among smallholder farmers and cooperatives by overcoming barriers to technology use in these communities. The proposed resolution capitalizes on these unbanked populations becoming connected to the digital economy, by enabling direct digital payments from consumers and downstream value chain actors to farmers. This in turn allows farmers to achieve higher and less volatile prices for their coffee, which they can use to invest in their own digitalization. The benefits resulting from increased digitalization include greater access to financial services, advisory services, farming inputs and equipment. All of which lead to improved coffee yields and quality.

This theory of change is supported by desktop research and interviews with stakeholders. A World Economic Forum study found that producers receive just 7% of the retail coffee price. Studies also demonstrate that consumers are willing to pay a premium for ethical coffee, however existing ethical solutions fail to fully capture this willingness to pay due to a lack of transparency (https://onlinelibrary.wiley.com/doi/pdf/10.1111/j.1745-6606.2005.00019.x). AgUnity has entered into a partnership with Virginia Tech University to validate these assumptions and investigate the true value that digitalization in the coffee value chain can unlock.

This solution leverage multiple innovative technologies and combines them in a new and simple way to create value. To build among consumers and value chain actors and enable the efficient transfer of value cross-borders to unbanked populations, this solution leverages blockchain technology. Specifically, we use the Celo blockchain, because it has extremely low transaction fees, is designed to be compatible with mobile technology and uses a proof-of-stake consensus mechanism which means that carbon emissions are negligible. Additionally, our solution requires digitalization of smallholder farmers and cooperatives. To do this, AgUnity leverages low-cost smartphone devices, cloud computing, mobile encryption, data caching and a custom operating system. This solution is designed specifically to connect first time mobile users living in areas of unreliable connectivity to the digital economy.

This solution is designed to improve equality in the coffee supply chain and promote inclusivity for unconnected and unbanked smallholder farmers. It has been designed and implemented with the users in mind in collaboration with various stakeholders. As part of this process, detailed journey mapping with the target beneficiaries, the smallholder farming communities, was conducted to understand specific pain points. This included group interviews separated by age and gender as well as in-depth and immersive individual interviews. This approach ensures we obtain a diverse range of views on the challenges that smallholder farmers and their families face.

This solution is designed to help accelerate digitalization among smallholder farmers and cooperatives. By getting downstream value chain actors to support the digitalization process, they improve smallholder farmers access to AgUnity’s products which in turn generates the data and information that downstream actors are demanding. The type of data that becomes available once farmers and cooperatives have access to AgUnity products include anonymized GPS locations of farms, growing practices, yields, instantaneous transaction data and more. Coffee buyers pay AgUnity a % premium on top of the cost of the coffee when purchasing to access this data.

Coffee buyers pay a premium to AgUnity on top of the cost for the coffee when buying coffee from cooperatives to access the data and information that AgUnity’s digital products generate when used by smallholder farmers and cooperatives. This data and information helps buyers to meet incoming regulations for importing coffee to the EU and as well as providing insight into variances in coffee yields and quality and how these issues can be addressed. Demonstrating that this solution can be profitable will also enable us to attract investment to accelerate the development and expansion of the solution to impact a greater number of smallholder coffee farming communities.

We have achieved significant traction and support for this solution thus far including investors, in-kind contributions from research institutions and stakeholders in the coffee sector and grant funding. Over $100k in financial support was provided by investors at the concept stage of this solution which enabled the MVP and strategic partnerships to be developed. Since then, Virginia Tech University and a large coffee trading company have contributed staff time to support research and evaluation activities. Additionally, the Australian Department for Foreign Affairs and Trade awarded us a grant worth $20k. Additionally, the value that our solution provides to value chain actors has been validated with over 20 different actors in the coffee value chain including café owner, roasters and traders, demonstrating revenue model feasibility.