How We’re Building Smart Contracts for P2P Lending in Africa
African economic development is a major area of opportunity for investors. Microloans have long been identified as a mechanism for institutions to fuel economic development. The problem, however, is that few entities have been successful in circumventing the widespread fraud and corruption that is the norm across the continent’s banking system.
Access is implementing a solution to this problem through a blockchain-based, P2P lending model.
In Short
Access is developing a blockchain-based system for P2P loans that adapts to banking activity on-the-ground.
The Access Network Foundation will oversee initial smart contract development and manage partnerships with on-the-ground service providers. These third party service providers manage their own services while benefiting from the liquidity of the broader Access ecosystem.
How the System Works
A set of smart contracts allocates interest to the lender for locking up stablecoins. The interest rate is determined by the duration of the loan, with longer terms yielding higher interest rates. Borrowers set the amounts and duration of loans.
The end result is a trust-based ecosystem. Using a Know Your Customer (KYC) process and skin-in-the-game incentives, our tech makes macroeconomic sense by connecting microeconomic dots. The system creates (1) microloans that directly support entrepreneurship and (2) high payback rates.
Pending approval, the borrower stakes ACX fees & receives the loan in cash from an agent.
Alignment with People
Members of the Access founding team have lived in Ghana and Senegal, where self-organized communities manage their own banking.
Access’s token economics models align with peer-to-peer networks on-the-ground. The blockchain-based system incorporates insights from non-blockchain, non-P2P system pilots that our partners have been running over the last few years, including the Atlas Money platform.
The Atlas mobile app equips local agents with a low-tech tool to collect deposits and distribute loans to their communities. The platform’s user base has already grown to 30,000. Agents have issued over 3,000 loans ranging from $150 to $200 USD with close to 100% payback rates across $500K in distributed funds. Through integration with Atlas Money’s infrastructure, the Access Network will instantly connect over 500 agents and 30,000 clients to a vast web of capital and additional human infrastructure.
How a Blockchain- Based P2P System Systematizes Microloans and Global Investment
Here’s how our system fits together:
- Creating a pool of funds. Unlike typical microloan services, the funds that Access collects do not go directly from lender to borrower. Instead, funds will flow through a blockchain-based pool contract. On-the-ground agent networks can only access and distribute these funds by putting skin in the game.
- Structuring payback periods. Lenders set their own interest rates based on the duration of their chosen payback periods. Rather than enabling variable terms, Access facilitates clear terms for both borrowers and lenders.
- Structuring interest payments. Lenders receive consistent interest payments. Rates are higher for loans with longer payback terms. Lenders receive interest payments in ACX coin, a secondary currency on Access.
- Requiring collateral. Borrowers use ACX as collateral to receive loans. They get this collateral back once the loan is paid off.
- Implementing a credit scoring algorithm. This is based on data from our banking agents, who have an ear to the ground.
- Maintaining solid processes. Access integrated third-parties maintain all KYC, AML, regulation compliance, local banking partnerships, and fiat-crypto transactions.
And here’s what we know works:
- Choosing the right partners. Our partners embrace a culture of financial success. Access partners work with populations of aspiring entrepreneurs, in communities with entrepreneurial track records.
- Working with trustworthy bankers. In Ghana, where many major banks have collapsed, people don’t trust banking infrastructure due to corruption and fraud. The microloan infrastructure will depend on autonomous agents who have track records of success in their communities.
- Bypassing established banks. We use blockchain infrastructure to tap into existing communities. Using cryptocurrency, global investors can send money to people who want to borrow money.
Join Our Journey
We’re spearheading a financial revolution, with key backers and partners. Become a part of the movement today:
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Contributors Statement
This work was a collaboration between the entire Access Network team, ranging from the CEO to CTO, COO, Chief of Staff, and other members of leadership. Emily Burchill, Shannon Wu, Ritika Puri, and Karissa Domondon created this story.
Disclosure
The opinions expressed are those of the authors and are no guarantee of the future performance of any Access Network fund or service. This information is for educational purposes only and is not intended as investment advice.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
