Global brewer Anheuser-Busch InBev has a new way to ensure that the African farmers who grow cassava for its burgeoning business in locally brewed beer get a fair price and deliver a reliable supply of the root, which replaces expensive imported barley in a local beer called Impala.
AB InBev’s global growth and innovation group, ZX Ventures, is partnering with a Minneapolis-based startup called BanQu, which will use a Blockchain platform to provide modern banking to the cassava farmers. Pronounced “Bank-You,” the firm’s aim is to lift 100 million people out of poverty by 2023, by letting the poorest of the poor own their access to the global financial system.
The world’s poorest have no way to build the credit history needed to join the global financial system, no matter how hard they work, Ashish Gadnis, BanQu’s 50-year-old co-founder, told Karma in an interview. Getting in the system is the only sustainable way out of poverty.
“If you’re a farmer in Congo, you have nothing,” said Gadnis, who grew up poor in Mumbai, but after earning an MBA in the U.S., built and then sold an accounting technology firm in 2012. “An aid organization or a microfinance group has all your data, and when a mother goes to get credit elsewhere, she has nothing.”
With no proof of selling crops to Anheuser Busch, a farmer’s access to credit is mostly blocked. For women, who were often best placed to lift their families out of poverty, the situation is worse. “You can’t prove your existence in the supply chain so you are exposed to predatory lending and your data as a farmer is compromised, so you never get to build your credit,” he added.
“Financial inclusion should not be ‘You’re poor, I give you money and technology but you stay poor,’” said Gadnis. “I think you should have equal access.”
Gadnis came up with the idea while working with the U.S. Agency for International Development in the Congo in 2014. He realized that almost all the agricultural and economic development projects depended on the sustained role of aid organizations, leaving indigenous farmers unable to gain needed financial independence.
After leaving Africa, Gadnis took a year off to think about a solution. The answer he found was Blockchain. “The gap is helping people build a credit history, and for me the problem to be solved was letting them own that credit history.”
The basic idea behind the project is simple: let each participant have a secure record of their transaction and a secure form of payment. The result is more cash for hard- working farmers, and a more reliable and higher quality source of supply for the brand. Tension, however, may develop as middlemen are cut out, says Gadnis.
Participants don’t need an expensive smartphone to make to make the system work. An interface developed by BanQu’s programmers in Kharkiv, Ukraine, lets all transactions be stored in an unhackable Blockchain, but makes the data easily accessible to farmers and brokers using SMS text messaging.
“When we went into bush in Zambia, I never had to mention the Blockchain or BanQu to a farmer,” said Gadnis. All the farmers needed to bring to the market was a text-capable mobile phone, which is ubiquitous in sub-Saharan Africa, and their national identity card. “The farmers have been asking for something very basic. ‘I want to know the price is fair. I want to know if there is a price incentive based on quality, and I want to proof of what I have been selling.’”
BanQu has been commercial for three and a half years, and is helping close the gender gap in earnings in sub-Saharan Africa, identified by the United Nations as one of its key Sustainable Development Goals.
With Blockchain-based proof of payment, farmers can now avoid the dangers of the cash economy – where risks involve losing earnings to bandits, extortionists or civil unrest. And women can keep their earnings to themselves. In fact, BanQu now offers three methods of payment, with all records permanently available at the end of an SMS message.
“All along the mother is building a credit history,” says Gadnis. And everyone from the brand to the farmer has a secure copy of the transaction. “We are big believers that the mother has the right to access, own, monetize and permission her data, or we are back to the old way where an NGO comes and says I’ll help you, but the day my funding ends the mother is screwed.”
The advantage for brands is that they can now prove they are locally sourcing their products, they can catch fraud and they have a direct connection to last mile. AB InBev says that by 2025 every one of their farmers will be connected through BanQu or a similar system.
Gadnis says BanQu’s goal is to make a profit while lifting people out of poverty. He won’t discuss margins, but he runs the business as a software service, and expects the firm’s revenue to reach $100 million a year by 2023, as well.
The firm has grown from 300 farmers in one village a year ago to 3,000 participants in three countries for AB InBev at the end of last year, Gadnis says. He’s shooting for 100 million users by 2023. “It’s an adoption I don’t have to force,” said Gadnis. “If a brand is buying from 50,000 farmers, all the farmers, or laborers or miners are on BanQu.”
Competitors include dozens of nonprofits and aid groups, as well as for-profit firms like Grameen Bank, which focus on banking the unbanked and micro-lending. A 2016 study by New York University economist Jonathan Morduch found more than 1,000 microfinance institutions in sub-Saharan Africa serving almost 16 million people, but noted that loans required an average subsidy of 20 percent. When subsidies end, most of these programs collapse, leaving the poor unbanked again.
With better credit data available, farmers with a good credit history will find it easier to borrow and grow their businesses.
And BanQu’s data also helps brands prove where their goods come from. “If a coffee company tells you this $8 cup of coffee is fair trade, they can’t prove it because they cant reach the farmer,” said Gadnis. “The way we build it, if the brand and farmer agree through BanQu, you can identify the farmer who grew the coffee and trace it right back to his farm.”
The funding from ZX secures BanQu’s ability to scale quickly in 12 countries where it is already present in Africa, Asia and Latin America. Rollouts in China and the U.S. are set for later this year.
BanQu had a seed round in 2016, and in 2018 raised $2.5 million in a series A round. On May 31 it raised $1.4 million from AB InBev, according to Crunchbase.
The investment will also help AB InBev meet its own sustainable development goals, in line with a major United Nations effort. “Through this work we are helping to create a digital ledger of farmers’ transactions that will create an economic identity and enable access to financial services,” said Maisie Devine, global director for AB InBev’s 100+ Accelerator. “This will ultimately allow farmers to grow their business and improve the livelihoods of their families and communities.”
“Blockchain won’t solve all of the world’s problems,” said Gadnis. “But if we look at it as a data platform, we have a good chance of solving some of the world’s problems.”