Leveraging DeFi to Close to Agriculture Financing Gap Robby Greenfield

how's everybody doing um so my name is robbie greenfield i'm the ceo of emerging impact emoji is the product of emerging impact um a bit of background on myself worked at consensus for a few years leading there social sector practice where we really focused on how do you leverage blockchain technology feasibly like to actually help people that don't have you know a whole bunch of money to buy nfts like in the real world right it may not even be digitally or financially literate and so throughout that experience you know really focused on developing dapps deploying them in the field usually with u.n agencies or major ngos um you know we've worked with oxfam red cross u.s state department unops to see and test okay how sustainably can you deploy dapps in the field and help real people and so today i'm going to really look at the world of d5 as it is and how it applies to attending to one of the biggest issues that the world has which is the agri-finance gap which we'll get into um so yeah it's 450 billion dollars um so often times when you hear and you hear the statistic a lot it's like oh the two billion people that are under banked or unbanked usually those people are agree workers right meaning they work in some form of agriculture and their entire livelihood is based off of their crop yield how much they can create via their crop how much they can sell and their entire income is based off of that the biggest issue with this population is that they don't have any access to financing to expand their farm right so if you are growing rice and you don't have any extra money to grow more rice you're not going to make any more income and so it's not the lack of financial tools or financial accounts or having a bank account that's really the big issue the big issue is is that there are too many pay gates or paywalls to people accessing more capital so that they can increase their own income and oftentimes when they are provided that access it's usually very predatory right the interest rate's like 120 percent a year and so that's the problem that we're facing and so you know again why is this a problem you know farmers you know need to expand to expand they need to buy things to buy things they need access to finance and the only way that you can increase you know the income you know of this population much of which is that two billion people is to give them that access so a great deal of this demand is focused on the continent of africa so i don't know if you all know this but 60 of all sub-saharan africans are agri workers which is insane like that's crazy yet with all the agricultural resources that the continent has it is currently unable to feed itself given the agricultural outputs of their farms they have all the resources but they don't have the infrastructure necessary to produce the food to feed their own countries because of a lack of financing and so this is obviously a huge problem and right now about one percent of all the people who need financing actually have access um and so this kind of opens up a lot of different questions like okay what's the state of d5 today how could it help um you know how do you put protection measures in terms of even giving them access you know how do you uh make sure that people don't default and obviously dapps and blockchain are not going to answer all of those questions so what i'm proposing today is to take defy if that's the foundation right for all the applications that could be built in social finance and propose decentralized microfinance which is really looking at the defy at a protocol layer but then looking at okay what are the other things that you have to do you have to build to actually make that finance accessible because it just existing does not mean it's accessible um and so starting with a little lesson on where's d5 today so it's about 254 billion dollars in total value locked across most major chains apologies if your you know chain is not included on the d5 llama dashboard but that's where i got that from and when you look at okay what is happening with all this cowboy 250 billion dollars that's insane that's more than half of the total financing demand for you know agriworkers globally so it's incredible that we could amass that much money in a single place and if we look like almost 90 percent is lending and borrowing and so we need to ask okay are people borrowing for real purposes in what context are they lending why are so many people 90 of that volume is in lending and borrowing and we start to see that it's because of a lot of these incentive mechanisms that a lot of protocols have put in place as to the reason why people are lending and borrowing so it's much much more often that somebody is lending or borrowing because they want to generate yield than it is that they are borrowing for a mortgage or borrowing for any other pragmatic reason that a non-crypto literate person would borrow money for and that presents a problem because effectively we're posed with d5 being you know as great as it is but it's not solving any pragmatic issues and if you look into actually case studies of people trying to apply d5 to pragmatic borrowing you'll see that it oftentimes fails because of the incentives for generating yield they're no longer there because they can't exist forever right you know there's a certain token allocation for each protocol to provide that yield for and so this is a pretty pretty big issue another um pattern in this is that for mainstream usage of d5 you're starting to see a lot more people use decentralized exchanges than lending completely and so this provides a different kind of different perspective in terms of how applications are being used versus protocols in terms of what mainstreamers are finding actually usable and so that's also very important to note um and so you know i took i just looked at ethereum because there's a hell of layer ones now so we just need to look at one and so if we look at all of the users across the three and let's just say every address is a unique person although we all know that probably is not true but 4.3 million users right most of them are using dexes whereas only 10 percent borrow and lend so you're seeing a great amount of tvl actually being deposited by lenders and borrowers but very few users actually use lending protocols most users are using decentralized exchange applications and we break it down to you know yield protocols to um you know derivatives as well so that would be you know your curve or your urine and that's kind of how it's broken up and if we wanted to kind of break that down in terms of okay what amount that's being lent or borrowed how does that map back to the average person like let's create a persona as to who is the average d5 user and what they're doing and it's about 32 000 lent per user so that also shows you not only are is there a discrepancy in terms of how mainstream users use dapps but also there's a discrepancy in terms of who is actually borrowing and lending right if you have thirty two thousand dollars in cash likely don't need to borrow anything unless you are trying to make another money move and so we're talking about a community of individuals who really don't need to lend a borrower at all and the reason that i point this out is because that metric the tvl per user that's what we should look at in terms of whether this default capital is having any actual social impact in terms of enabling real people who actually need to borrow money for pragmatic purposes and so if we want to look at this in terms of like okay how do we enable decentralized micro finance you probably want to lower the tvl per user right you want that to be 100 or 20 per user instead of 32 000 per user and obviously as an outcome of that you want to increase their their income and so what is decentralized microfinance um and so really it's taking d5 fundamentals right all the protocols that we see and creating an application layer that can interface in very hard to reach areas so when i say hard to reach areas not an iphone application not going to work we are talking about ussd applications ussd is unstructured supplementary service data so that is a communications protocol that can operate on a feature phone like a nokia we're talking about android applications right because there are far more android users than there are iphone users ios users and we're also talking about interfaces that completely abstract all blockchain anything and i know that you already know this but leveraging meta transactions paying for transaction fees and not using any technical terminology at all so not even showing a public address in most cases is all going to be really really important but even beyond that like decentralized microfinance requires partners to be in place to ensure that people are financially educated and to also mitigate the risk of default so in the context of a smallholder farmer right in tanzania they're not only going to be able to they know they don't only need just the tools to be able to accept that loan and spend it but they need the context as to how they should spend it and how that's going to relate to their increase in income how that's going to increase their productivity yield and so all of this i say is you know decentralized microfinance an entire framework built on top of a d5 protocol that enables normal people typically in underserved circumstances to actually borrow uh from a lot of these areas and so on the side here you know i kind of break it down in terms of what that model looks like so you have goldfinch finance you have ave ark you have moolah you have compound you have ave average and ave obviously being you know differentiated in permission borrowing you know versus just open borrowing right which would be avid and how you can take all of these different protocols which effectively set the financial terms for these farmers and actually give them access on on a predictable in a predictable way and then the second stage is you know creating compliant debt facilities so this looks at okay we know we have all the protocols we know we can get a hell of a lot of money into these protocols how do we actually take that money into a legal entity and legally distribute it to people right which you are aware as you see you know not not the best partner in enabling this in the united states and so imagine that same regulatory you know ambiguity in every single geography that you look to implement like create this or implicate this um and then last you know capital lent to a merchant or ngo so we found that a great way to mitigate risk is actually to partner with organizations that are on the ground that understand the local context so that could be in an agro worker context it could be the red cross it could be an oxfam it could be a one acre fund that already have microfinance programs in place and already have a methodology of educating people of you know limiting their rate of default and then of course distributing the capital itself and so what could this bring so traditional microfinance pretty damn exploitative um i mean it's actually incredible how high the interest rates are in a typical microfinance loan oftentimes microfinance institutions are located in urban centers so they are not typically giving any financing to people who do not live in the city right and so that's a delimiter as well um and also there's um and that's called spatial exclusion like excluding people who wouldn't otherwise be in the city and there's also um of course a lot of limitations in terms of the financial literacy oftentimes in a lot of mfi programs farmers typically feel like they were not educated to the point at which they could actually take on that loan and take the responsibility of paying it back and that typically creates higher default rates um and then you have asset based lending so this is something that an organization called one acre fund does which is i'm not going to give you the money i'm going to give you the seed or fertilizer and then you're going to use that in your farming operations to do what you need but of course the issue with that is is that if you want to be a little bit more self-determinate or autonomous with your capital it's extremely limiting to give somebody seed when they need fertilizer or vice versa or a completely different agricultural input that might expand their farming operations beyond what you're actually giving them and so it's very limiting toward what the people can use it toward however there are some benefits it's much much better default rates right because they're educated they can only use the capital for a single purpose and so it actually does provide some guard rails as to how like money is being used and so what we're proposing is is that decentralized microfinance can get around spatial exclusion if you allow digital wallets to operate on feature phones or you provide nfc cards that can receive money digitally which is very easy to do but of course you also have flexible repayment terms as well right because if you use a goldfinch finance or an ave arc for example in a permission borrowing protocol scenario you can continue to pay that loan off for as long as that maturity date is set and you can set that maturity date which is going to be a lot more flexible than what farmers usually have to do which is pay every 30 days which if you're in a seasonal market right i could not be able to pay you back for another 60 to 90 days and so that flexibility that protocols bring actually is very helpful but of course without the partners on the ground it kind of falls short so it's a combination of those two that allow you to get around a lot of these barriers um and so there's a lot of different funding models and this is super super important for anybody who's thinking about building an application on d5 protocol is is that that sets the economic parameters for your application so you have to understand how that protocol works in terms of the collateral that's used which is incredibly important i'm going to tell you now there's no small farmer there's no smallholder farmer in the world that could borrow on ave or compound alone they can't do it why can't they do it requires 80 percent collateral that's why there's no point in borrowing if you have to put 80 collateral down and so you know and that's why ava has created partnerships like ave arc to create permission borrowing pools rather than collateralize buying pools so that just doesn't work um but there are also other things that don't work as well you want to have a form or a sense of credit that's usually not tracked by you know traditional protocols so that's something that your application might need to take over and you need to be able to communicate what credit even is in a way that's approachable and then beyond that you also need to have payment terms that are are fixed so variable payment terms in rural areas just causes more anxiety for the person that's borrowing and so these are really really important things to take into consideration when you're building an application on top of these protocols because there's not much you can change once you start you know distributing the loans um and so that's you know another note and so what we've done is that we've taken these different models and we're like okay based on these different models what are things that we would want to see what are attributes we'd want to see and i've looked at you know collateral apy the you know the protocol that fits those and the limits and you know right now i really do think it's probably a race between credit delegation and permission borrowing tools and permission permission borrowing pools in terms of what you can pragmatically use in the real world for people who are underserved you can't really use lending pools as they are today unless the collateral restraints are are lowered right like lowered from 80 percent to like 10 percent um another thing that's you know important on this is is that for like credit delegation you have if usually credit delegation schemes they don't require the person to pay back the money right it's kind of an option mulla is a perfect example of this where i can delegate you a hundred dollars i can lend that to you but there's no crypto economic you know parameter that really enforces you paying me back and so um it's really important to have if you don't have those within the protocol then you have to recreate those you know risk mitigation techniques in the real world as well and so you know what are the building blocks look like so if you were to go all the way from the top to bottom things that you're going to want to consider outside of collateral constraints are going to be high transaction throughput obviously looking at cross-chain initiatives like all bridge and others is going to be really important because you're going to want to create a foundation where they can access wrapped assets that may not even relate to lending at all may relate to things like micro investing and as you all have seen people are kind of pushed into this you know decision of selecting a single chain and all the assets and liquidity that comes with it and the problem with that is that it's greatly limiting to what you could provide that in person and so i'll probably end there um but you know as a further introduction to kind of what we do so moja is you know an application interface to effectively take liquidity from d5 protocols and lend it in micro financing programs and so we focus more on the applications and interfaces built on top of these tools we are always looking to partner so if you are you know a dex a d5 protocol or a layer one chain that's looking to you know find social impact use cases for your ecosystem we love partnering uh with entities and very typically work with multinational ngos to do these programs and so certainly reach out to me if you uh if you want to do that cool yeah [Applause]