DeFi Opportunities

There are some interesting developments in the crypto / DeFi space, notably protocols like Goldfinch which are pooling capital from investors who want to invest in real-world assets. Recently, Branch, which provides unsecured consumer loans via mobile, secured $10mn to deploy in India at 17% via Goldfinch from Cauris and Almavest. 

Given the amount of capital sloshing around in the crypto space, the challenges of rural / farmer group credit in India, we are curious about whether there may be an opportunity here.

Practically, the idea is to come up with a couple “financial product” ideas and gauge liquidity provider (crypto-speak for lender or donor) interest. There are also a bunch of regulatory and currency exchange issues we need to work on in parallel.

Ideas to explore:

1. Working capital loan for FPOs: See here

2. Ecosystem Services payments: Go direct to funders and avoid the registries which eliminates complexity and issues like requirement for land records and additionality. Look to Regen Network as a potential partner or analog for generating credits and in addition to corporate buyers, can look to crypto currencies like KlimaDAO and Celo that want to purchase offsets for their treasuries.

3. Sustainability finance: Help de-risk adoption of CSA practices by providing capital during a 2-3 year “transition” period. Maybe link w a certification standard if we believe that might help with price realization once the transition is complete. Might overlap with (2) above

   1. For reference, Samunnati claims that 11% of its loan book (8624 crore or nearly $1.2bn) is to climate smart initiatives and expects this to double over the next couple years: “Of the 270-odd identified categories, Samunnati’s climate-smart asset compliant value chain activities include lending to initiatives on soil nutrient improvement (organic input and output), water conservation (precision farming, agroforestry, hydroponics, micro-irrigation), wastage reduction in food processing, cold storage, reduced emission (solar equipment, sustainable dairy, bio-fuel and bio-mass) reduced chemicals (precision farming, organic input and hydroponics), among others. Samunnati also has exposure to millet-based activities, afforestation activities — crops that increase the green cover and are also working with the plantation sector that helps preserve it, he said.”

4. Revenue based financing for farmer groups: Financial sponsors contribute capital; rather than a fixed rate of interest, they get back a % of earnings each season are paid back until 2x the original investment is repaid. This could stretch over multiple seasons and duration to repay informs the % return. Used by cooperatives in the US where access to traditional bank debt is hard and cannot raise equity.