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Microfinance case study

Challenge : Decentralised finance

Vision: Use Cardano currency and technology infrastructure (smart contract, SSI, DeFI solutions) as use case for microfinance investments - from the lender (generally a fund located in Europe or US) to the end-borrower (a micro-enterprise located in emerging markets)

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Microfinance asset class & impact investing

  • Microfinance asset class was the first impact investing segment with proven positive track record (since early 2000)
  • Market size for the asset class of nearly USD40bn (2021)
  • Total of >500 funds for >260 investment managers
  • Switzerland is the largest deal sourcing countries (>35% of total), followed by the Netherlands (17%).

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Description of microfinance investment value chain

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Investor

Can be a HNWI or institutional asset owner willing to lend capital, mostly debt, �to a microfinance asset class, ��typically between USD250k-to 1m for a HNWI and USD1-20m for an institutional asset owner

Investment vehicle

Can be a specialized microfinance fund or a foundation pooling capital from investor��typically sizes of >USD50m

2

Microfinance bank

Can be a specialized microfinance institution or bank located in emerging markets, ideally one in Latam, one in Africa and one in Asia��typically local and regulated bank with >100k clients

3

Micro-entrepreneurs

Can be local micro or SME enterprises, ideally a dozen per project��typically self-employed or small companies with less than 10 staff borrowing loans from $100 to USD5k

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Project phase

Phase 1

Validation study

Assess the feasibility of the project �- by selecting one investor, 2-3 microfinance banks�- via a legal opinion to proof the possibility to execute the transaction via crypto-currency and smart contracts.

Phase 2

Proof of concept

- Develop a digital platform to automate the creation of a term loan agreement �- Execute transactions with 2-3 microfinance banks�- Execute transactions to a substantial number of microentrepreneurs

Phase 3

MVP

- Scale the solution to other funds and microfinance banks

- add to the platform fund transfer to and from borrowers for full traceability

- borrower financial ledger to show impact on borrower

Phase 4

Investment platform

- Commercialize a solution via a fund raising