Blockchain in Food and Agriculture Supply Chain: Use-Case of Blockchain in Indonesia

Blockchain in Food and Agriculture Supply Chain: Use-Case of Blockchain in Indonesia

Aidah Maghfirah (HARA, Indonesia)
DOI: 10.4018/IJFBMBM.2019070104

Abstract

Agriculture is one of the most important and largest sectors in Indonesia and creates jobs for at least 38.7 million workers. Although the number of workers in agriculture is relatively high and the sector contributes 14% to Indonesian GDP, many challenges still remain hampering growth. One of the key issues is the limited data availability in the agriculture sector causing imperfect and incomplete information on agriculture products. Data can provide the information about the quality of the product to the consumer to create transparency between producer and consumer. In order to facilitate data access, a big data base is needed in which all stakeholders can access the near-time data. A technology that can help to support this database is called blockchain. Blockchain is an immutable, transparent, public and append-only ledger. It is a peer-to-peer network that can maintain updates and verifies those updates to the ledger in a way that it is impossible to alter the data. This paper discusses HARA, a use-case of blockchain implementation in the food and agriculture sector.
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Introduction

Agriculture is one of the most important and largest sectors in Indonesia. According to the data from Indonesia’s Central Bureau of Statistics (Badan Pusat Statistik, or BPS), the number of the working population in the agriculture sector in February 2018 was 38.7 million people (Badan Pusat Statistik. n.d.). This number is around 30.45% of the total working population in Indonesia. Although the number of the working population in agriculture is relatively high, many challenges exist in the sector hampering growth. One of the key issues is the limited data availability in the agriculture sector, causing imperfect and incomplete information on agriculture products.

Data is the basic need in all sectors, especially for the economy. The existence of data can provide information on product quality to the consumer, creating transparency between producer and consumer. The availability of data in agriculture can reduce losses of a food company because they can have a better understanding about the source of the product, improve communication in the supply chain and improve its operations. On the other hand, via data on for instance farmers profile and cultivation, smallholder farmers can be connected to the supply chain and gain access to services, such as working capital loans, crop insurance and quality inputs, to increase their productivity and income.

To facilitate data access, there needs to be a big data base in which stakeholders can access near-time data. Technology that can help to support this is called ‘blockchain’. Blockchain is an immutable, transparent, public and append-only ledger. It is a peer-to-peer network that can maintain updates and verify those updates to the ledger in a way that it is impossible to make the data fraudulent (Blockchain for better decisions, n.d.). Blockchain has been used in various sectors ranging from health and copyright protection to supply chains. One of the companies in the photography field, Kodak, has developed a blockchain called the KodakOne platform, a digital ledger of image rights that photographers can use to license their work and instantly receive payment for any online usage. Besides photography, blockchain is now also implemented in the food and agriculture sector.

With blockchain, everyone can access near-time data in the agriculture sector. Farmers can input their agricultural production data to get appropriate agriculture loans as well as better insights in market prices. Food companies that need agricultural products can get better insights in the source and quality of the products. The track record of the farmers is stored on the blockchain and helps farmers to connect with buyers. With blockchain, the food chain supply will be more transparent, effective and efficient. Furthermore, a company can easier maintain their quality of food products because they have more reliable information about the source.

It is believed that blockchain will be very useful to all agriculture stakeholders. However, to provide data integration and exchange, a platform is needed as an intermediary. HARA aims to bridge this by providing a blockchain-based data exchange to make the agriculture data accessible for all stakeholders. HARA is an agri-technology start-up from Indonesia who started in 2015.

The platform connects smallholder farmers with other stakeholders, like financial institutions, input producers and offtakers based on the exchange of valuable data. HARA crowdsources the data collection through “agripreneurs” young village leaders who will be incentivized for data collection through mobile phone. In addition, these agripreneurs help to provide and monitor products and services to the farmers, such as inputs and finance. HARA is currently running several pilot projects with banks for the disbursement of microloans. In their operations in East Java, already 2,000 farmers received microloans through HARA operations with a repayment rate of 97%.

The current database of HARA with farmer relate data, production data, and location specific data, will eventually be an input to build additional services such as traceability.

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