AFEX Commodities Exchange Limited (AFEX), Nigeria’s first licensed private commodities, Sterling Bank Plc and Binkabi, a builder of decentralised trading commodity network and exchange have collaborated to create the world’s first fully digital, blockchain commodity trading and financing platform for farmers.
The partnership, initiated by AFEX is hinged on the dearth of adequate agricultural finance in the sector and the critical roles AFEX’s Warehouse Receipts System (e-WRS), Binkabi’s Blockchain Technology and Sterling Bank’s access to credit play in leading the creation of a reliable source for financing in agriculture for Nigeria.
Currently, lack of adequate finance in the sector has remained one of the major factors limiting farmers’ productivity.
Also, the traditional alternative to money lending is also costly as interests on loans are charged at very high rates, contributing to the increased challenge of indebtedness and poverty.
As a result, the collaboration has leveraged on blockchain technology to unlock cheap financing through AFEX warehouse receipt system which would lead to the creation of new opportunities and relationship for players in the commodity markets.
Ayodeji Balogun, country director, AFEX said that the initiative is needed to change the lives of farmers and the Nigerian economy, by establishing a direct link between farmers and consumers/retailers, while empowering smallholders to better organize themselves to access the market, without interference from middlemen.
Balogun states that the transparency of the blockchain system in the supply chain will also enable farmers get fair prices for their produce and reduce the challenge of low income.
“Blockchain does not require physical branches, since it is operated on a distributed network. It would create alternative financial structures, liberating farmers from the inefficiencies of the existing financial system. This partnership would empower smallholder farmers, create a tokenized system and develop smart agriculture,” he said.
Blockchain technology is based on a shared ledger or DLT (Distributed Ledger Technology) and contains features that make it possible for networks such as farmers, consumers, retailers, producers and investors to not only transact but also source and supply finance.