Problem Statement

According to the World Bank, a quarter of the world population is excluded from the traditional financial system. For these 2 Billion people, the only source of working capital is the small cash loans they can borrow within their own communities, often paying over 100% anual interest for it. 70% of the so called Unbaked are smallholder farmers living in poverty despite producing one third of the world's food. This exclusion cuts across all geographic regions and financing types, but is particularly concentrated in long-term agricultural finance, for which 98% of global demand remains unmet (Rural and Agricultural Finance report of 2019, ISF Advisors, 2019)

In her book, “It’s Expensive to Be Poor”, award-winning columnist Barbara Ehrenreich claims that people in poverty are not in that situation because of self habits but because they simply do not have money at the moment. Indeed, research on this issue has repeatedly highlighted the most persistent obstacles to overcome for smallholders in need of financial resources, ranging from excessive documentation requirements to high account fees and limited access to bank branches.

Securing loans for smallholder farmers at affordable interest rates is short of impossible within the traditional financial system (TradFi) as these last mile farmers do not have data for credit scoring and their small lands are not eligible collateral to access formal credits. So even when they are good payers (global default benchmark for goupal loans is less than 3%) there is no record to prove it because it was in cash, so this population is considered a high risk investment by local banks and similar actors.

Furthermore: some of the greenest areas of the world is where the Unbanked live: 80% of the global production of coffee comes from poor farmers with 2 or less hectares of land. Agriculture is key for Climate Change with more than ⅓ of the food being produced by smallholders. Their inclusion into global financial, certification and carbon markets is a blue ocean oportunity enabled by new technologies as blockchain because DeFi can act as a catalys to fuel resources to the consecusion of the Sustainable Development Goals, allowing people around the world to take part in solving these problems.

More than a decade after the invention of blockchain technology, DeFi has emerged as one of its most important and revolutionary uses. The ability to securely manage financial assets of real value on a decentralized network, with total transparency, traceability and immutability, without the added cost of intermediaries, sets the ground for a new financial system where the Unbaked are not longer excluded.