DeFi Cape Town: same tech, different areas of solvency

A summary of our learnings from the DeFi Summit in Cape Town, that we co-organised with MakerDAO, Linum Labs and the University of Cape Town- Financial Innovation Lab. Thanks to all the teams for their efforts and to all who attended the summit!

The audience during the panel “Financial Inclusion: Frontier Tech in Africa”

At the DeFi events last year in Prague and earlier this year in Paris, we shared about the privacy features of Centrifuge. Specifically, we presented our privacy-preserving precise proofs and how these allow for the sharing of a subset of a document while keeping the rest of the document private.

At the DeFi Summit in Cape Town and ETH Cape Town we saw a shift in focus and interest to issues of data immutability and the use case of invoice financing with Centrifuge OS.

On Financial Inclusion & Real World Business Applications

The DeFi Summit’s focus was on financial inclusion, that is, the provision of access to appropriate and affordable financial services for all. In this context, we highlighted some of the business models facilitated by Centrifuge OS that increase access to funding for businesses from micro-entrepreneurs to SMEs around the globe.

The audience showed interest in real-world applications for Centrifuge, asking tough, technical and relevant questions about trade finance and supply chain financing, coming from backgrounds in traditional financial services, agriculture, non-profits or blockchain-based companies.

One of the use-cases we highlighted was Deep-Tier Financing. A process that transfers the beneficial credit rating and/or cheap access to liquidity of a large corporation to its suppliers — over several levels — to enable access to funding at a beneficial cost.

In addition, we highlighted tokenized invoice financing, one key feature of Centrifuge OS. On a global scale, businesses wait on average for 58 days to receive payments for their invoices, and as with all averages, the distribution of the data set needs to be taken into account. Some industries, supply chains, and geographies have much longer payment terms, allowing for nightmarish conditions (~2-year payment terms in the Tanzanian cotton supply chain). For the farmer at the bottom of these international supply chains, the importance of being able to receive payments sooner than later, cannot be highlighted enough.

A panel on Frontier Tech in Africa

From left to right, Ana Andrianova (CEO & Founder, Akropolis), Ben Onuoha (Founder, African Blockchain Alliance), Liesl Eichholz (Growth Strategy Lead, Linum Labs), Gustav Arentoft (Business Development, MakerDAO), Philip Stehlik (CTO & Co-Founder, Centrifuge) and Florian Buhringer (Co-Founder, Protea).

During the panel on Financial inclusion- Frontier Tech in Africa, we joined forces with some promising projects in the DeFi ecosystem to discuss the challenges and opportunities of decentralized finance in Africa (MakerDAO, Linum Labs, Akropolis, Protea and the African Blockchain Alliance). The implicit reliance of blockchain-powered DeFi solutions on access to cheap and reliable internet — an uncertainty in many parts of the African continent — was a consistent theme behind many of the tough questions posed to the panelists. Accessibility was also discussed in the form of light nodes or mobile-first options, which were seen as solutions to these problems.

Additionally, questions posed to the presenters emphasized the need for further education of the general population on the solutions offered by the DeFi space, as well as general financial literacy. While some in the audience were representing traditional financial services firms such as Old Mutual or the South African Banking Alliance and had heard of invoice factoring or financing practices, many were new to even the fiat form of the idea.

Unique opportunities for the DeFi space were also discussed. Stokvels — a form of rotating credit union or saving scheme — have a long history in South Africa, and similar informal community initiatives, such as ROSCAs (Rotating Savings and Credit Associations) exist in many other countries in Africa and across the globe. The informal sector plays a huge role in most developing economies, and alternative peer-to-peer financing has consequently been an invaluable financial instrument to navigate cumbersome or non-existent formal financial institutions. The combination of these factors are strong drivers in the development of a decentralized financial infrastructure for the African continent.

All in all, the DeFi Summit in Cape Town was a fascinating probe as to the current state of decentralized finance in sub-Saharan Africa, its challenges and preoccupations.

Thanks again to MakerDAO, Linum Labs and UCT Financial Innovation Lab for the collaboration, and to all of you who joined the Summit!