Improving Financial Inclusion Through Affordable Credit Access with Thor Abbasi

co-founder at xibo finance and before I begin I just kind of want to throw a question out to everyone which is why are you here today and why are you in this space and just think about that for a second and for me it's because I believe this technology gives us the power to rebuild the systems that govern our lives in a fairer and more transparent manner and there's a market that many of you have probably never heard of right here in the U.S and also around the world that needs those values brought to it desperately and that's the high interest consumer lending Market so in the U.S every year 12 million Americans will take out a high interest loan uh and one of the big reasons for this is half the country uh does not have a thousand dollars in savings for an emergency expense so let's say everyone on this half of the room congratulations you have a thousand dollars for an emergency uh you guys over here you do not have a thousand dollars for an emergency and unfortunately many of you for various reasons do not have access to normal credit uh you might be an immigrant in the country for instance you don't have a credit score and let's say your car breaks down and you need to fix it to get to work a lot of times your only option is to take out a high interest loan and these loans in the U.S uh payday loans in particular have an average interest rate of 390 percent uh and I think we can all agree that no one should have a loan at 390 percent uh it's insane and I mean we're all kind of degen's here and that's insane for us to even here uh and it's a 70 billion dollar market in the U.S 20 billion dollars of which is unsecured Consumer loans and those numbers are directionally correct and even worse in many places around the world for instance in Romania the average interest rate on those loans can be a thousand percent uh and these loans are really devastating on people's lives both financially and emotionally so I just want you to take my word for it too you can go kind of Google uh High interest lending horror stories and you'll find all sorts of things and so I just went and found a Bloomberg article that talks about it and they kind of feature three people that have unfortunately you know for various reasons had to take out these loans uh so the first guy I kind of want to talk about is a guy named Jamie Johnson uh from Detroit now he took out a forty five hundred dollar loan on the start of the pandemic uh at an interest rate of 125 from a company called Elevate credit uh and he took this loan out because he was in a financial emergency and was going to pay it back as quickly as he could but like many people he lost his job at the beginning of the pandemic um and he actually used his stimulus check and some of his unemployment checks to keep making payments on this loan so he did not default now this is money he could have spent on taking care of his mother uh who's disabled or his kids in building Financial wealth for his family uh he eventually got his job back and was able to pay this loan off but it took him years to do it and that's money he could have been using to build a better future for his family uh the next woman uh is a person named Joanne combine from South Carolina and she's a retired truck driver who also found herself in a position where she needed to take out one of these loans and she took out a loan for 650 dollars at a 325 interest rate and that's a real number and she ended up paying this company back it's called net cash USA and their subsidiary of Innova International uh and she paid them back over fifteen hundred dollars and because she was on a limited income she ended up selling her possessions to do so uh and the last woman I'm going to talk about you can kind of see her story here uh on this chart right here and this is really what we're trying to fix here because this should not happen uh and it's a woman named Kimberly Richardson uh and she took out a 2500 uh line of credit and Drew 2500 now this line of credit before fees has an interest rate of almost 300 percent on it so over the course of several years she paid this company back almost ten thousand dollars uh and still ended up defaulting on the loan because the interest rate was that high uh and shouldn't be going bankrupt because of it and this sets her back uh to square one financially and it should not happen in the U.

S or anywhere else in the world uh and this loan was also made by uh Anova International now before I kind of flip to the next side does anyone want to guess uh what these two companies have in common or who their largest shareholders happen to be anyone have a guess okay so these companies are all um as you can see the largest shareholders in most of these companies happens to be BlackRock and Vanguard and State Street uh and these are the people that are running your retirement accounts and so you know your retirement account or your mother's retirement accounts are giving money to these companies to give these loans uh to individuals and it's harming them and they have a profit interest in doing so and so they keep doing it um and the thing that all these people had in common is they tried to do the right thing and pay these loans off uh they all did their very best to pay them off to varying degrees of success and with that and if you don't care about this yet I think the thing that um is really important to note here is you know Financial inclusion and the concept of having access to Affordable Credit uh is one of the key drivers of economic Mobility now the thing with that is everyone having access to economic Mobility uh is a key driver in growing the economy and so in essence what these companies are actually doing uh is stifling the economy in a sense not only in the US but internationally uh and this has a huge impact on people's lives and our society as a whole um and the government has tried to do some stuff to Outlaw this or ban it uh at the national level but Congress is not very effective at doing much of anything these days um and so they failed to do that now states have things called usury laws which cap interest rates uh and a lot of states that cap them at 36 percent um but these companies are really uh smart and unfortunately there's a lot of loopholes to get around this stuff uh one of those being what's known as a rent a bank scheme so let's say I'm a lending company and I want a lend in California for instance California has a law in place that you cannot lend over 36 percent but what I can do as a lender is I can go partner with a bank that's based in say Utah uh that doesn't have user Recaps and I as the lender will underwrite that loan if it's approved the bank will fund the loan at whatever interest rate I want and they will give the money to that customer and then they sell the rights to the loan back to me as the lender so that I can collect on it and this is just one of a couple of ways that these companies are able to work around existing regulations and so it's pretty clear that the existing companies in the space and the government are not capable of solving this and there needs to be something done this should not exist and we have the tools do that um and people have tried in the past to kind of do some stuff with this um if you guys have ever heard of like Lending Club or Prosper uh they try to do kind of peer-to-peer Landing in the early 2000s and what ended up happening is they did that and it was actually working pretty well for them and it worked so well without a whole bunch of large hedge funds and stuff came in and basically said hey guys instead of dealing with 40 or 50 000 little kind of lenders why don't we just give you a couple billion dollars to make these loans and you pay us uh and we'll make a better deal for you and so a lot of those companies took that deal um but the thing is is blockchain and smart contracts don't really care whether or not you are an individual or an institution uh to a piece of code it's kind of all the same and so that's where xivo comes in so uh at xavo we are working to disrupt uh High interest consumer lending uh not only in the US but eventually globally as well and so our team comes from a kind of mixture of background so some of us are kind of more uh traditional Finance guys and have some experience in this market uh and a lot of us are more kind of crypto native now in the case of someone like Kimberly Richardson for example who would be someone we're trying to help she is obviously shown she has an ability to repay a loan she paid him almost seven thousand dollars in interest it's not like she wasn't paying them money and so where xiva comes in is we can take someone like her and we can refinance her loan down to a significantly lower interest rate and we can save her a lot of money and help her avoid situations like what happened to her in becoming bankrupt now so far you all might be making sense um and you may be wondering a little bit why this is you know needed as a crypto project now with everything I've kind of set up to this point the traditional Financial system the traditional players have no interest in changing this they print money doing it and they've been doing it for 40 years um but the great thing about blockchain is it gives us a way to aggregate capital and vote with our money in essence so if you think this is a thing that shouldn't exist you can put your money into a pool and help these people and so what we are doing is we are allowing liquidity providers to provide liquidity to our protocol and that money is then used to refinance those loans in Fiat and so we are essentially bridging between tradify and defy to begin with and eventually as things move more and more on chain we want to move completely on chain and so from a value perspective we help borrowers who are in situations like Kimberly refinance their loans and we give liquidity providers uh the ability to earn a return on that uh greater than what you would find on chain right now for a lot of stable points and so this is a uh kind of screenshot from our dap that's been up on a test net uh so we've built a lot of our project out and we're hoping to launch it in about uh six to nine months so with that being said guys uh if you want to talk about this a little bit more or learn more about it uh feel free to kind of scan our QR code and reach out to us on Twitter uh happy to answer any questions you have or anything else uh so with that being said I'll go ahead and open it up for questions thank you um so first of all I I like what you're doing and I empathize with it I had my own credit score basically destroyed by medical debt so recognize the problem Lending Club has been doing this for over a decade hasn't been able to turn a profit to date I've been an active investor in this space most people maybe make four to six percent on those types of lend income platforms how are you going to make a profit and how are people going to get profits greater than they can get just staking on a yield platform yeah for sure so I think it goes back to when I was talking about the refinancing portion of this we're not originating new loans we are refinancing existing loans and so we are very targeted in the individuals and the types of loans that we want to deal with and so we're looking uh for a particular customer and we have some other kind of underwriting analytics that I won't get too into that we believe will allow us to Target uh specific individuals like that who will be able to support repaying the loan and have very low default risk because they've proven through a variety of ways that they are credit Worthy and then in terms of why we believe we can give a higher return uh for on chain stable coins and stuff I think right now um especially in longer term I think a lot of what's in crypto right now I think people are working on it is we as an industry have to bring a real world use case uh to the rest of the world and I think the thing is with this is as we bring more and more of this on chain a huge part of what's considered um an expense in running a typical lender are things like paying payment processors processors and other stuff it'll take you know two or three percent fee as we can do more and more of this stuff on chain we can cut all of those kind of middlemen out of the equation and we believe that will allow us to provide a higher return uh for people who are staking their stable coins then you can typically see right now any other questions cool well with that being said thank you very much guys if you have any questions feel free to come talk to me after [Applause]