UX Research – Crop Insurance, Climate Change, & Blockchain

Problem:

• Another one of Nepal’s cash crops is the Banana. Unfortunately, climate change will affect all farmers, not just coffee growers, including banana plantations.
• As the temperature increases by 2°C +/-.5°C by 2050, Nepal’s ideal bioclimatic region will also increase the Himalaya region’s suitable banana production areas by about 40%. Since the impact of climate change on banana plantations is not as drastic as it is for coffee farmers, bananas’ expected production is expected to grow (Ranjitkar et al. 2016).
• The authors of the article “Agriculture Insurance in Nepal: Case of Banana and Livestock Insurance” interviewed 500 Chitwan banana farmers. They discovered that of the 500, only 34 of them insured their banana crops and were satisfied with the current premium rate. This is problematic as the rate should be affordable, considering that the Ministry of Agricultural introduced a subsidy on the premium paid for crop insurance in June 2013. A 50 percent subsidy on insurance premiums paid by the individual farmer, farmers’ groups, and farmers cooperatives for crops. In 2014 this subsidy increased from 50 percent to 75 percent to further attract farmers to insure their agricultural commodities.
• Two major issues need to be addressed for the banana farmers to get insurance. First, quick settlements of claims are an urgent manner that would help farmers continue their enterprise without loans. Windstorms were found to cause heavy damage to the banana farmer’s crops from February through July. The time to fulfill a claim could take months to reimburse the farmer. The second major issue to get insurance, a land entitlement certificate is required, limiting access to farmers who have leased their land. (Ghimire et al. 2016)

Solution:

• Climate vulnerability of crops is increasing, and small farmers have not yet developed the capacity to adapt.
• “Blockchain Climate Risk Crop Insurance” is a digital platform for weather-index crop insurance for small farmers.
• It will facilitate transparent, timely, and fair pay-outs in extreme weather events to increase resilience to the effects of climate change.
• Using smart contracts implemented on the blockchain will pay-out farmers a week after an extreme weather event occurs.
• Using smart contracts on the blockchain reduces the claim cycles and increases the claim process’s transparency.
• If, for example, a satellite detects high winds above an insured banana plantation, then a claim will automatically be filed. The insured will receive a payout within a week rather than the normal amount of time, approximately 3 months.

Problem:

• Coffee is a curiosity crop for Nepalese farmers and has farmers excited by the crop’s large market potential. However, this growing sector will be disrupted by climate change as small farmers will continue to face cultivation related problems.
• According to a 2016 article, “Suitability analysis and projected climate change impact on banana and coffee production zones in Nepal,” the suitable production area of coffee will dramatically shift by 2050. As the temperature increases by 2°C +/-.5°C, the ideal bioclimatic region will be reduced, limiting the suitable coffee producing areas in the Himalaya region by about 72%.
• The changing environment due to climate change will have a duel impact on farmers as the land needed to produce coffee will be minimized, and the decreased quality of the coffee bean grown.
• In general, small farmers will face cultivation problems and have limited access to relevant future climatic conditions and coffee production information. These factors will directly influence local community economies and the national economy as exports are affected. Most of these small-scale coffee farmers will take a direct production hit as climate change worsens (Ranjitkar et al., 2016).

Solution:

• A solution that could fit the Nepali farmers’ needs is a mobile robot and blockchain-based company called Bext360.
• The mobile robot weighs the coffee beans and visually assesses the quality of the beans. This allows the coffee buyers and farmers to rapidly analyze the beans’ quality almost in real-time as the beans are evaluated in the field.
• The machine sorts the beans using optical sorting to decide what coffee cherries are ripe or spoiled and give higher or lower marks accordingly.
• The buyer and seller can then negotiate through the Bext360 mobile app and be paid directly for their product.  Farmers can then use a mobile app to view payments based on coffee quality and may offer or reject the proposed payment.
• They are effectively increasing compensation for higher quality cherries.  The combination of blockchain technology furthers the mission of “fair trade,” which refers to the movement to improve the lives of growers and other producers through trade. It drastically improves the transparency of the supply chain (2019).

Problem:

• Nepalese Dairy farmers struggle to sell all the milk they produce to the market.
• The main middleman in the supply chain for milk in Nepal is the Dairy Development Corporation (DDC), but they are regularly hesitant to purchase milk, which is inconsistent for suppliers.
• The inconsistency leaves farmers unclear on how to make their livelihood and pay back their loans.
• The DDC lacks the infrastructure to supply the number of milk producers that are providing the market.
• In regards to Climate Change, milk production will be reduced due to increased disease, parasite infestation, environmental stressors, and lack of appropriate quality and quantity of feed. Similar studies found a higher temperature-induced significant decline in milk production, slower weight gain, and lower feed conversion efficiency. The livelihood of the Nepalese dairy farmers will be challenged further as Nepal gets hotter. The milk produced will need to be efficiently and effectively supplied to buyers (Shrestha & Baral, 2018).
• For example, in the city of Chitwan, some 250,000 liters of milk are produced daily. In District 7, the DDC only has one tanker to collect 4,600 liters of milk per day. The milk chilling center collects 13,000 – 15,000 liters of milk per day. The local market only consumes 6,000 – 7,000 liters leaving an abundance of milk that needs to be supplied to surrounding districts such as Pokhara or Kathmandu. Instead of supplying these districts with Nepali milk, farmers allege that the DDC imports milk from India (Rawal, n.d.).
• To put pressure on the government through a form of protest, farmers regularly dump unsold milk, up to 200 liters, along the road, or they give it away for free to nearby pedestrians.
• After 3 years of protesting, pressure has successfully been built up enough on the DDC to raise dairy products’ prices.
• For example, on raw milk, farmers will now earn at least 6 rupees per liter, instead of 3 rupees. However, the Farmer cooperatives are warning of further future protests demanding that they raise the price of milk by 10 Rupees per liter such that they can keep up with the increased cost of production in the past few years. (Republica, n.d.)

Solution:

• A Nepalese dairy farmer’s needs could be a hybrid solution between decentralized village milk collection and testing center, such as Happy Cow Dairy, and a Business to Consumer milk delivery service.
• Happy Cow Dairy is an Indian company with branded bulk milk collection centers in villages with a complete facility for milk collection, testing, grading, chilling, and storing. The facility is equipped with the latest technology running on solar power.
• Milk collection and testing data could be captured in real-time and uploaded to the cloud such that both farmers and customers could make instant quality checks.
• A solution such as this would create consistent channels for farmers to access the market as they reliably receive 100% digital payment directly into their account (Happy Cow​ Dairy, n.d.).
• A Happy Cow Dairy, a testing facility, has set up bulk milk collection centers in villages with a complete milk testing facility, grading, chilling, and storing (Happy Cow​ Dairy, n.d.).
• End Users would follow the data upstream by scanning a QR code on the bottle starting from the Cows health all the way to how the milk was transported. (A blockchain for the Dairy industry, 2019)

This was one of the most exciting projects since I collaborated with local Nepalese in considering this idea from the ground up. This is one of my favorite projects because it is a real-world problem that I identified on my own and charged through the uncertainty to discover an innovative solution with the potential to disrupt many industries. I also learned about the potential for smart contracts’ to help with climate change adaption by automating some industries’ business processes on the blockchain. This project directly influenced me to get involved with Blockchain developers in which I helped build an insurance business process automated on the blockchain.