.png)
In its pursuit to democratize the financial system, Decentralized Finance (DeFi) has unveiled immense potential for economic freedom and prosperity. Among its various benefits resides its ability to bridge the global economic gap and initiate generational wealth for those who have been forgotten and excluded by the traditional financial system.
In October 2021, the Atlantic Council’s Geoconomics Center released an issue titled “Designing Decentralized Finance for Financial Inclusion” illustrating DeFi’s financial inclusivity:
“As of 2017, 1.7 billion people do not have access to a bank account and many more are underbanked. Women, communities facing poverty, and young people are disproportionately excluded from the financial system. Much of this, of course, is tied to generations of systemic exclusion, violence, and economic extraction. \ DeFi could afford access, especially to those who do not have formal identification or who live in places without robust institutions or stable economies.”
As the DeFi ecosystem continues to innovate, it must include a holistic approach to serve unbanked populations. In fact, some DeFi projects have begun to do so already, such as the GoldFinch Foundation and Satchel.
The Goldfinch Foundation uses crypto as a “reset” to the financial system. Their mission is to “to expand access to capital by creating a single global credit marketplace.” In other words, any user from the smallest local business in Africa to the largest traditional institution in the United States will borrow from the same capital markets and “all investors will be able to access those opportunities.”
So how does Goldfinch use DeFi to achieve their mission? Let’s hear it directly from them:
Borrowers (currently off-chain lending businesses) propose deal terms for credit lines (Borrower Pools) to the protocol. Goldfinch's community of Investors can then supply capital to these credit lines (Pools), either directly to individual Pools (as Backers) or indirectly by automatically allocating capital across the protocol (Liquidity Providers via the Senior Pool).
These Borrower businesses use their credit lines to draw down stablecoins, specifically USDC, from their Pool. Borrowers then exchange the USDC for fiat currency and deploy it on the ground to end-borrowers in their local markets.
In this way, the protocol provides the utility of crypto—specifically, its global access to capital—while leaving the actual end-borrower loan origination and servicing to the businesses best equipped to handle that in their own communities. (Source)
Goldfinch is just one example of how the power of DeFi can provide access to capital around the world no matter the background of the borrower; no one can be left behind.
Satchel is a DeFi protocol that empowers underbanked school communities by enabling them to pool money together and earn interest that can then be used to improve their schools while also providing income for the lender (e.g., parents, teachers, etc.).
(Source)
Goldfinch and Satchel are just two examples of numerous other projects in DeFi looking to expand financial inclusion. For a better look at more projects in this space, check out our helpful table below.
Name | About | How it Works | Link |
Goldfinch Foundation | “Goldfinch is a decentralized credit platform for crypto loans without collateral. This is the missing piece that finally unlocks crypto lending for most people in the world.” | Borrowers (currently off-chain lending businesses) propose deal terms for credit lines (Borrower Pools) to the protocol. Goldfinch's community of Investors can then supply capital to these credit lines (Pools), either directly to individual Pools (as Backers) or indirectly by automatically allocating capital across the protocol (Liquidity Providers via the Senior Pool). These Borrower businesses use their credit lines to draw down stablecoins, specifically USDC, from their Pool. Borrowers then exchange the USDC for fiat currency and deploy it on the ground to end-borrowers in their local markets. In this way, the protocol provides the utility of crypto—specifically, its global access to capital—while leaving the actual end-borrower loan origination and servicing to the businesses best equipped to handle that in their own communities. | |
MoHash | MoHash is a DeFi protocol which provides investors access to sustainable scalable stable high yields backed by real world debt assets. MoHash is bringing global liquidity to non bank lending in high growth economies. | MoHash is a crypto asset manager which provides investors access and global liquidity to real world products on-chain. The investors are taking a call on the ability of specialized institutional underwriters who are market leaders and have excellent track records to create good products. Risk sharing mechanisms are used to align incentives of the underwriter and investor. Since diversified portfolios are tokenized the idiosyncratic risks are limited The protocol issues a fungible ERC-20 token (MoH Token) that reflects a claim on a diversified pool of debt instruments which are risk managed and financially regulated in order to protect the investors’ interests. | |
Satchel | Satchel uplifts underbanked school communities by facilitating locally-governed projects & capital growth via DeFi-powered donations & financial primitives. | Satchel allows people in a community (around a school) to pool money together, which can be lent out to earn interest. The interest generated can then be used to improve the community (and school) while also providing income for the lender (e.g., parents, teachers, etc.). | |
Credix | Credix is the decentralized credit platform that gives borrowers in emerging countries access to previously untapped capital. Our marketplace provides credit lines to high-quality borrowers with an attractive yield for investors globally. | The platform enables FinTech companies and other non-bank lenders to convert their receivables and real assets into investment capital. All financing happens on-chain using USDC & smart contracts, creating instant efficiencies, settlement, and more transparency. | |
EarthFund | EarthFund is a DAO-controlled blockchain platform that looks to assist in crowdfunding for projects with an aim to contribute to a brighter future of the planet. The EarthFund is a decentralized platform governed by its community. EarthFund's goal is to use the features of the Internet to create an autonomous platform for the masses. The developers of EarthFund seek to provide users with the option to collaborate with projects and communities that the users relate with. The EarthFund DAO looks to allow the community to participate in something they genuinely care about. | According to its whitepaper, 1EARTH is the native utility token of the EarthFund platform. 1EARTH is an ERC-20 token that the holders stake in exchange for governance tokens within the EarthFund platform. These governance tokens enable users to voice their opinions on the EarthFund platform by granting access to voting rights. The 1EARTH tokens are locked using a smart contract that prevents the token from being available in the open market. Such a contract helps to protect the nominal value of the 1EARTH token and also ensures sustainable liquidity for the token. The 1EARTH token allows holders to associate themselves with cause-specific communities and enables donations to any project. Participation through staking the token also generates incentives for the holders. |
Comments