Blockchain-powered lending arrives to rural Brazil

Moeda is making its first investments in 18 Brazil-based agricultural co-operatives following a $20m initial coin offering last August.

New York-based Moeda, a start-up that describes itself as the first co-operative lending platform powered by blockchain technology, will invest an estimated $1.5 million in 18 agricultural co-operatives based in Brazil, the home country of the firm’s chief executive and co-founder Taynaah Reis.

The funds will come from the $20 million Moeda raised last August through an initial coin offering, $10 million of which was earmarked for seed projects.

In addition to financing, the firm will also provide loan recipients with technical assistance.

“This is a crucial part of Moeda’s vision,” another of the firm’s co-founders, Isa Yu, told Agri Investor. “Moeda’s technical assistants provide early business and financial assessments, as well as ongoing advisory services.”

The loans have an average term of six months and an estimated rate of 15 percent, although the interest rate may vary, Yu said. According to statistics drawn from a 2017 report by the Central Bank of Brazil, other lenders could charge as much as 120 percent for similar loans.

Credit gap

Founded in 2017, Moeda’s mission is to enable sustainable growth for underfunded entrepreneurs worldwide. The firm also places great emphasis on supporting women-led enterprises.

“More than 40 percent of businesses registered in Latin America and the Caribbean are owned by women, according to the World Bank-IFC Enterprise survey,” Yu said. “However, the credit gap for women-owned enterprises remains high throughout the region. Brazil, in particular, has one of the largest credit gender gaps, and 45 percent of women-owned SMEs identify access to finance as a major constraint in operating and growing their businesses.”

The 18 businesses that will secure funds in this first round of financing include the Vale do Itajaí Family Co-operative in Dona Emma, Santa Caterina, which will receive $520,000 to build a bio-factory for organic agro-ecological production. Lebon Regis Family Farms Cooperative, located in the same southern state, will get $205,000 to construct, equip and provide working capital for a women-owned bakery.

Cutting costs

The loans, which range from $6,000 to a maximum of $520,000, are being provided in partnership with Unicafes, a national organizing body of co-operatives in Brazil.

Asked which other emerging markets Moeda is considering to invest in, Yu replied: “Moeda has been looking into a few emerging markets, including India, Kenya and Columbia, which have similar investment environments as Brazil and equally high adoption rates of mobile phones. That said, we haven’t decided yet where we’ll be investing next.”

The result of a hackathon launched by the United Nations to help achieve its Sustainable Development Goals, Moeda’s winning entry comprises a business model based on blockchain technology and cryptocurrency.

According to the firm, “blockchain in particular allows for the creation of trustworthy, immutable records and operational efficiencies that ultimately translate to a lower cost of lending.” It also helps solve other challenges that microfinance often encounters, including lack of transparency and costly middlemen.