Blockchain complementary currency

African rural communities are essentially marginalized when it comes to getting access to financial services, access to well equipped health facilities, higher learning institutions and even 3G internet access.

These communities are apparently invisible to government bureaucrats who are responsible for allocating national resources. Consequently, the rural population’s share of the national cake is usually not commensurate with their share of the national population.

Surprisingly however, the same communities are not so invisible when it comes to their participation in national plebiscites! An unusually enthusiastic government will go all out to ensure every eligible member of the rural population gets an opportunity to participate in national elections or referendums.

This lopsided distribution of resources unfortunately helps to sustain the rural to urban migration, a trend that naturally leads to overpopulated cities, strained infrastructure, pollution etc. Apparently, there are no incentives for young people or even for the older ones to stay in such remote locations.

That has been the trend for years and there is every reason to believe things will stay the same for many more years unless of course a new way of thinking and planning is adopted.

Re-emergence of barter

As one remarkable scholar concluded, necessity is the mother of all invention or innovation, it is trite that in the absence of government interest or support, rural communities will find ingenious ways and means to overcome challenges of their time. Even with limited resources, such ingenious solutions will stand the test of time.

 The apparent resumption (or continuation) of barter trading as an alternative to cash trading is one enduring solution that showcases such ingenuity. This very old school trading is one way marginalized communities are responding to cash shortages, the unfair of provision of financial services as well as that of commercial trading platforms.

For many years many now, communities in remote places have resorted to using excess grain or even livestock to settle obligations when trading.

Often it is the high transportation costs, which must be settled with cash a scarce commodity, as well as the absence of a ready market for their produce, which force rural dwellers to resort to barter trade.

So instead of trying to lure a long distance buyer—who may not offer the best deal—a communal farmer/rural dweller will agree to swap some of his grain with a commensurate quantity of vegetables that are offered by his neighbor. Animal power is then used to move the grain from the seller to the buyer thus eliminating transportation costs. The consequence of this is that both parties will be satisfied even as there is no actual cash changing hands.

Interestingly, enterprising business people from the cities are now getting in on this trading by bringing in merchandise, mainly processed foodstuffs and non-food products as exchange items.  

In Zimbabwe, traders from the capital Harare are known to bring basics food items like sugar, cooking oil and salt, which they exchange for commodities like raw maize, soya beans and sugar beans etc. Urbanites are drawn to this trading due to the stability of the ‘exchange rates’ used when swapping goods as well as the ready market for the exchanged produce back in the cities.

To illustrate, a two liter tube of cooking is normally exchanged with 30 kilogrammes of raw maize grain. Similarly, two kilogrammes of packed sugar swaps with three gallons of maize grain. Alternatively, city traders can ask for sugar beans instead and this also comes with its own exchange rate.

After raising sufficient quantities of either commodity, city traders will arrange for transportation of the grain to their respective towns where the produce will be sold in cash thus earning them a handsome profit in the process!

On the other hand, farmers too will be satisfied because the excess grain—which they sometimes lose to due to infestation by insects—has secured them a commodity which may be in short supply without parting with cash. It’s a win-win outcome for all parties to this trade.

Already this kind of trading is quite common in areas like Raffingora, Guruve, Shamva and in many other areas north of Zimbabwe where communal farmers are known to produce more maize or sugar beans than they consume.

This reciprocal trading is usually brisk soon after the harvest period and during that time the list of items demanded gets bigger because farmers are happy to use the surplus grain as payment while the scarce cash is reserved for emergencies.

However, as stocks deplete, this form of trading drops and deals will be mainly confined to basics only.

The limits of barter trade

Indeed, while barter trade is helping marginalized communities to overcome the challenge of cash shortages, it still has its own unique limitations, which preclude parties from trading even when there is no better alternative way of settling transactions.  The so-called coincidence of wants is one of the many such limitations that are known to curtail barter trade. The coincidence of wants (often known as double coincidence of wants) is an economic phenomenon where two parties each hold an item the other wants, so they exchange these items directly without any monetary medium.

This phenomenon is difficult to achieve in practice and is one of the primary reasons we have money as we know it today. Unfortunately, when money evolved, it happened in ways that left many behind.

Today those without identification documents cannot open a bank account, the only formal way to withdraw cash or to receive social grants from government. Predictably, the majority of those excluded by this system are found in rural areas where the process of issuing or replacing lost documents is at best minimal. Perhaps that is the reason why barter trading seemingly never stopped there.

Without a financial institution to offer financial services as well as a ready market for his produce close by, a communal farmer is forced to resort to barter as a way of settling business transactions. However, such trading faces another constraint of being confined to one particular small location and this has disadvantages for the farmer.

For example, communal or rural farmers in Zimbabwe’s Manicaland province are renowned for producing potatoes and bananas. Should they decide to swap these for other commodities, farmers will only be able to barter the potatoes with buyers in close proximity. This means trading will be possible mainly with fellow local farmers who may already have a surplus of the same commodity.

The same goes for farmers in the country’s Mashonaland Central province, part of Zimbabwe’s top maize producing region. Farmers in this province can only barter with fellow local farmers who already have the grain in excess supply! If urban traders do not show up as has been the case since 2018, then farmers will not get the maximum value from their produce because the exchange rates used will reflect local dynamics only. Valuable commodities will be exchanged at well below the price of similar but commercially traded commodities. It is here where new technologies like the Blockchain can help to make barter trading just and satisfying.

Blockchain as a solution

Blockchain technology has already been lauded as a potential game changer in the monetary and currencies issuing space, but few people have idealized its potential beyond this.

The technology can also potentially enhance barter trading through the creation of stable tokens or a platform that aids such trading. Importantly, this can happen without necessarily disrupting or threatening the conventional financial system. In fact, any such solution will complement the national fiat currency where it falls short or fails to perform some of its functions.

In October 2018, when Zimbabwe’s currency sharply depreciated against global currencies, barter trade involving urbanites and rural dwellers also dropped significantly. At that time, the prices of the basic foodstuffs suddenly shot up threefold while that of agricultural produce remained static. So where the barter exchange rate was 30 kilogrammes of maize for every two litres of cooking oil prior to the currency drop, urbanites now demand more grain for the same quantity of oil to make up for the price increase.

Of course, communal farmers did not accept this then and they still cannot accept this now because nothing has changed in terms of the quality of either the exchange items or the satisfaction they get from the same. The utility is still the same.

In other words, it is the fiat currency which has failed but that need not to affect barter trade which involves the exchange of physical products.

This point becomes clearer when the bartering involves citizens of other countries whose fiat currencies might be more stable than that of Zimbabwe. For example, fish farmers in Chidodo area along the Zambezi valley, are known to buy everything from food to clothing almost exclusively with fish. Some of these farmers are Zambian and Mozambique citizens, and quite naturally they are unconcerned with the Zimdollar’s collapse but demand maize meal that is produced in Zimbabwe nonetheless. It is up to the Zimbabwean trader to see if a deal is still possible following sharp price increases because the Zambian or Mozambique fish farmer will still offer the same quantity of fish regardless. This is a textbook example of a failing fiat currency and how this affects trade and not just barter trade.

Stable tokens that are underpinned by the Blockchain can be used to insulate rural farmers from upheavals in the financial system, a system which already excludes them anyway. The tokens will be a representation of what a farmer physically possesses and as such their value needs not to change or fluctuate.

These tokens should be distinct from stablecoins like Tether, which actually competes with central bank issued fiat currencies.

So in essence, barter trade eliminates inflation and the Blockchain technology will help this to happen on a much bigger scale.

In addition, any such Blockchain supported system could potentially broaden the market for farmers’ produce. Communal farmers in villages of Manicaland province will be able to use their produce to acquire maize from communal farmers in villages of Mashonaland Central province and this will prove to be much cheaper or convenient for all involved.

Following the collapse of Zimbabwe’s only commodity exchange, ZIMACE in the early 2000s, farmers struggle to find markets for their produce beyond their villages or towns. Linking communal farmers to more markets can potentially increase national output and thus reduce reliance on food aid. Such interconnection of these fragmented traders is only made possible by deploying the Blockchain.

Community currencies

 Already something similar has been initiated by Grassroots Economics, an NGO in Kenya and preliminary results suggest this Blockchain supported stable currency initiative is improving the quality of life for that country’s rural populace. Aptly called a community currency, such tokens circulate alongside and not against national currencies.

The Sarafu Network, as this Kenyan community currency initiative is known, began testing in August 2018, with the first-ever tomato traded on the Blockchain. Roughly six months later, nine village-level tokens have been piloted, hundreds of businesses have been on-boarded, and by March 2019, the pilots had hit a major milestone: 1000 wallets on the network. These wallets are owned by locals who work as farmers, school teachers, retailers, healthcare providers and more. A farmer can now receive payment in village’s local currency, which she can then use to pay for her child’s school fees, and so on.


Currently one million unique trackable Blockchain tokens have been issued while 2500 businesses, schools and clinics are in the Sarafu Network. According Grassroots Economics, 61% of on-boarded businesses experienced an increase in sales revenue while 36% of users report an increase in savings.

Bprotocol Foundation (Bancor) serves as the technology layer in the Sarafu Network.

The Bancor Protocol ensures convertibility and liquidity for the tokens without needing a counter-party or an intermediary. That means commerce can be autonomously and securely processed on the Blockchain without having to rely on a central authority like a bank or telecom to maintain the integrity of the network. Pricing and transactions occur through a secure set of auditable smart contracts integrated with the Bancor Protocol on the POA Network Ethereum side-chain, enabling instant transactions and minimizing transaction costs to a fraction of a cent.

As already outlined, conditions exist for marginalized communities in Zimbabwe and indeed across Africa, for the deployment of a similar platform and governments need to support this. So instead of hoping that financial institutions will heed the call to decentralize their operations, governments can encourage entrepreneurs to create such Blockchain supported currency solutions.

And as results in Kenya show, community currencies will lead to more stable markets. Stable markets increase certainty for farmers, which in turn lead to increased production. Higher production will inevitably lead to the creation of employment opportunities for locals and the reduction of poverty.

All of this and lot more will be possible if governments across the continent move quickly to embrace this technology. In Kenya, the government initially responded with hostility, Will Rudnick a founder of Grassroots Economics was even jailed time for his efforts.

The organization’s currency initiative was initially misconstrued to be a direct attack on the Kenyan Shilling’s monopoly when in fact it was not. Community currencies are created to complement economic activity where the national fiat currency cannot. In fact, prior to Grassroots Economics’ Kenyan incursion, a similar concept had proven its usefulness in countries like Italy and Switzerland. The Sardex currency of Sardania, Italy showed that community issued currencies can enhance local trade and the government there has not stifled this project.

The local government understood the purpose of this currency early on and as such there has been no heavy handed response similar that seen against Giacinto Auriti the late advocate for privately issued currencies.

Kenyan authorities eventually relented once they understood the facts around a community currency.