We generate all of our yield through sustainable investments in real-world assets, offering up to 20% APR. Learn more about OpenFi inside.
Introduction
Incidents like the recent LUNA crash and Celsius fiasco underline a fundamental problem. When it comes to crypto, how can you know that what you’re investing in is safe? With some truly jaw-dropping rates of return on offer in the marketplace, it’s only natural to want to understand exactly how those yields are being generated in the first place.
At Gluwa, we are completely transparent on this point. That’s because we understand that the more you know about the mechanisms in place, the better you’ll feel about investing.
How does Gluwa Invest generate yield?
First off, let’s look into how Gluwa Invest is structured.
Gluwa Invest operates through the Gluwa Fund LP, a private investment fund that invests in high-growth emerging market fintech companies, and which is managed by Gluwa Capital, the fund’s general partner. This structure allows us to open up new markets to everyday investors like you and me — all part of our commitment to democratizing finance.
To generate its industry-leading returns, Gluwa Invest earns interest through debt financing, lending capital to data-enabled companies including Jenfi, Aella and Untapped Global — all of which boast impressive YoY growth. Importantly, all of these companies generate real-world yield. That means none of Gluwa Invest’s yield is generated through collateralized DeFi lending pools or by otherwise staking, leveraging, or rehypothecating your assets. By extension Gluwa Invest products are insulated from the volatile peaks and troughs of the cryptocurrency market cycle.
By leveraging data, these partner companies are able to effectively assess and monitor risk to deliver exciting new financial products to people in emerging markets. Whilst we can’t share exact details about how their algorithms work for IP reasons, there is plenty of publicly available evidence showing how mobile phone data can predict credit risk. For example, studies show how individuals in the highest quintile of mobile phone predicted credit risk were 2.8 times more likely to default than those in the lowest quintile.
It’s not all about the data, though. For example, both Untapped and Jenfi employ novel revenue-based lending models to better align financial incentives between them and their borrowers. You can read more about these innovative risk mitigation measures and more in our partner company profiles.
As for the yield itself, 20% APR may be the headline, but our real mission is plugging the $5 trillion financing gap and building towards a world of financial inclusion. That means you can earn interest and help make the world a better place. In fact, our yield models depend on bringing financial services to the unbanked and the underbanked, and giving everyone access to credit, and investment opportunities, no matter where they are in the world.
What determines the interest rate offered?
Gluwa Invest offers three different types of product with varying rates of interest that their reflect level of risk.
💰 Investor DAO - Investor DAO’s headline rates of up to 20% APR are generated through debt investments into emerging market fintech companies with a fixed tenor date (typically 1 year). Longer deal tenors allow our partners to utilize capital more efficiently thus enabling a higher interest rate. In return for higher rewards, you are naturally exposed to higher risk (predominantly, investment default risks). Read on for more information about how we mitigate these risks.
💱 Flexible Interest Account - This product lets you freely withdraw and deposit your money whenever you want. Of course, this also creates liquidity risks for the fund, thus requiring us to maintain a higher pool of cash and cash equivalents when operating the product. This uncertainty naturally impacts interest rates when compared with Investor DAO’s fixed-term deals, and is the reason why our Flexible account offers a lower interest rate. However, unlike the Investor DAO, our Flexible Interest Account will be backed by Gluwa Inc.’s own balance sheet in case any losses occur.
🎲 Lottery Account - Our Lottery account operates identically to the Flexible interest Account. However, all of the interest earned from your investment goes directly into the prize pool.
What are the safeguards and risks when investing?
The reality is, there simply isn’t a way to earn 15% yield completely risk free. When returns depend on loans being paid back, the chance of default always exists. However, there are some important aspects in the way we operate that reduce this risk:
- 👨🏻💼 Our deal sourcing, diligence and monitoring ability. Gluwa Capital performs extensive due diligence on borrowers for each debt financing deal. This includes a thorough analysis of product traction, management team, governance, and most importantly financials, all to help us gauge the risk of the borrowers and the deal.
- 🚗 Our partners’ risk mitigation ability. We’ve already mentioned the richness of data our partners have on their books. When it comes to preemptively reducing and monitoring default risk, leveraging this data with machine learning and other forms of statistical models makes all the difference. Our partners’ also use business models designed to help mitigate risk. For example, rather than extending loans, Untapped Global provides productive capital directly to businesses — in one case, lending motorbikes to a taxi company. This has the benefit of protecting Untapped from default: if the taxi business goes under, there are no outstanding loans to pay back. Untapped can simply reclaim its motorbikes and find a new home for them. That means Untapped is never exposed to excessive default risks. But don’t just take our word for it, every Investor DAO deal also gives you confidential access to the fundraisers borrowing performance, including default rates, total loan value and more to help you make an informed investment decision.
- 🔍 The Creditcoin Network. Our final ace in the hole is Creditcoin. Whilst Creditcoin doesn’t exactly eliminate risk, it does help reduce information asymmetries between you, the investor, and our partner companies by ensuring that credit performance within the OpenFi ecosystem is both transparent and reliable. That means you don’t have to take our word for it, you can always check the performance of our partner companies independently before making an investment decision.
Risk is an inherent part of any investment, it’s what brings rewards at the end of the day, but that shouldn’t come at the expense of trust. At Gluwa, we always strive to put not only profits, but sustainability, transparency and trust, at the heart of everything we do.
Get involved with OpenFi investment today. Download the Gluwa app here: 🍏 Apple | 🤖 Android
If you have any more questions on how we go about generating yield, please don’t hesitate to get in touch.
