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 in Nanyuki, Kenya.
The salary advances in this pilot helped farmers and landowners employed by Cinch, an agriculture company that leases farmland from smallholder farmers and hires farmers to grow high-value crops at 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 overhead
With the loan distribution part of the pilot complete, we know that 68 employees took on salary advances amounting to $9, 697 at a competitive annual interest rate of 8%. Interest rates of loan alternatives in Nanyuki were well above 20% at the time.
“This is the best loan group I have ever seen. It is the first one I have seen with such a low interest rate.”
Employees taking salary advances utilized Moola Market, a DeFi lending protocol built on Celo blockchain, and Kotani Pay, an on/off ramp provider in Africa.
Cinch deposits collateral into Moola, and delegates it to the employee. By doing this, employees are able to access low-interest advances offered by the Moola protocol without depositing collateral themselves. Each participant was delegated enough collateral to take on a salary advance up to 4 times their monthly salary.
Then, using Kotani Pay’s USSD system on either a smartphone or feature phone, employees were able to send a series of text messages to request their salary advance from the Moola protocol. Within a minute of making the request, money was deposited into the participants’ M-PESA accounts.
DeFi enables anyone to be a lender, and offers scalable infrastructure upon which to build low interest rate solutions through access to global capital pools.
The next phase of the pilot will assess repayment rates and quality-of-life improvements. Mercy Corps Ventures and the Celo Foundation will release a comprehensive impact report later this year to share key insights.