To explore how mobile-first DeFi built on Celo could offer a truly unique solution for employer-based lending, the Celo Foundation has partnered with Mercy Corps Ventures and Cinch Markets to launch a three-month salary advance pilot project in Nanyuki, Kenya.
Wage advances from this pilot project have helped farmers and landowners employed by Cinch, an agricultural company that leases farmland to smallholders and hires farmers to grow high-value crops on a large scale. The pilot, which began in April, explores how employer-based lending using DeFi apps built on Celo could offer the following:
- Better interest rates
- Faster loan delivery
- Reduced administrative costs
With the loan distribution portion of the pilot project complete, we know that 68 employees have accepted payday advances totaling $9,697 at a competitive annual interest rate of 8%. Interest rates for loan alternatives to Nanyuki were well over 20% at the time.
“It’s the best loan group I’ve ever seen. It’s the first I’ve seen with such a low interest rate.
– Ephraim Wachira, Cinch employee
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SEE ALSO: [WATCH] When you start innovating with money, you’re building a regenerative financial system – A Conversation with Founder, CELO
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The process
Employees taking used salary advances Moola Marketa DeFi lending protocol based on the Celo blockchain, and Pay Kotania ramp supplier in Africa.
Cinch deposits collateral in Moola and delegates it to the employee. By doing so, employees can access the low-interest advances offered by the Moola Protocol without posting collateral themselves. Each participant received sufficient security to take a salary advance up to 4 times their monthly salary.
Then, using Kotani Pay’s USSD system on a smartphone or feature phone, employees were able to send a series of text messages requesting their Moola Protocol salary advance. Within a minute of the request, the money was deposited into the participants’ M-PESA accounts.
Looking forward
DeFi enables anyone to be a lender and offers a scalable infrastructure on which to build low-interest solutions through access to global pools of capital.
The next phase of the pilot project will assess reimbursement rates and quality of life improvements. Mercy Corps Ventures and the Celo Foundation will release a full impact report later this year to share key insights.
Learn more about the Cinch project on the Celo Foundation Blog where to watch this video for a detailed overview of the driver.
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