Pilot Launch | DeFi-enabled salary advances for smallholders in Kenya

Mercy Corps Ventures
Mercy Corps Ventures
6 min readMay 25, 2022


This post is the first of a two-part series; the second blog will share key insights after the pilot is completed.

The Context

Smallholder farmers and casual laborers in Kenya have limited access to credit. As low-income segments that are already exposed to volatile shifts in the climate and gig employment markets, barriers to capital are barriers to resilience.

Traditional financial institutions are often reluctant to offer credit products to these types of borrowers as it’s both expensive and unprofitable to lend small amounts of money to groups deemed ‘risky’ with a higher likelihood of defaulting due to limited and low income streams. Other loan access options, such as Chama groups (micro-savings groups), and SACCOs (member-driven cooperatives), require farmers to have saved for a certain period and/or need guarantors, while friends and family are turned to only in emergencies. However, there is an alternative option. People can go to their employers for short-term loans, and while corporations and government institutions still encourage employees to borrow from traditional financial institutions, small and medium enterprises often offer loans in the form of a salary advance.

For Cinch Markets, a Kenyan-based land management company, they currently provide closed-loop payroll advances to their landowners, casual laborers, and full-time employees as a value-added service, but this can be administratively intense which is a bottleneck to scaling.

We’ve set out to test the potential for scale when integrating a Decentralized Finance (DeFi) lending platform that enables fast credit at affordable rates, and significantly reduces the administrative burden.

Pilot launch, Kenya. Photos courtesy of Celo and Kotani Pay.

The Pilot

In April 2022, we partnered with Cinch, Kotani Pay, Moola Market, and Celo, to launch an employer-based lending pilot in Nanyuki, Kenya. Cinch’s core model is to lease farmland from smallholder farmers, providing them with a stable monthly income (often up to three times what they may typically earn), and then make key infrastructure investments in the land to support the transition into high revenue-generating activities, transferring 100% of the risk from farmers to Cinch. The leases are short-term, which gives landowners the opportunity to opt-out every 12 months or so, and in return, they receive a lease payment, stable salary, and dividend. Through this, Cinch has managed to create employment opportunities — especially for women — and trained local youth in agronomic practices.

This pilot aims to provide landowners (who lease their land to Cinch), casual laborers (who work for Cinch), and full-time employees (who are on Cinch’s payroll) with DeFi-enabled salary advances. Cinch deposits collateral onto Moola Market, and then delegates that collateral onwards, availing a line of credit to each borrower. Farmers and employees can then access low-interest advances in Celo Dollars (cUSD), a stablecoin whose value is pegged to the US dollar. The salary advances are bridged to M-Pesa through Kotani Pay (and converted to Kenyan Shillings), allowing the borrowers to access the funds in their individual M-Pesa accounts. By using Kotani Pay, users are able to interact with the Celo blockchain and take on advances through a feature phone, rather than relying on a smartphone.

Pilot launch, Kenya. Photo courtesy of Celo.

At the pilot launch, 68 landowners (with small farms of around four acres each), Cinch employees, and casual laborers were registered to receive a Kotani Pay wallet. Cinch then delegated cUSD collateral to each borrower wallet created using Moola Market. The borrowers could then request the amount of money they desired by dialing Kotani Pay’s USSD code (able to borrow up to an equivalent of four months lease payments or four months salary) and received a confirmation message that the money had been deposited in their mobile money wallet. At this stage, most participants were excited to use these funds for school fees, household expenses, and livelihood needs, and were very happy with the 8% interest rate charged on the product, commenting that the rate was lower than alternatives available in the market:

“This is the best loan group I have ever seen. The bank charges 15%, Mshwari — 12%. This is 8%”
Pilot participant — Male*

*The bank and Mshwari interest rates referenced in the quote are not annual and would be much larger. For Moola it is 8% annual.

Over the next three months, the borrowers are now expected to pay back the acquired salary advances, either by garnishing this from their monthly payments from Cinch or through self-repayment via Kotani Pay. Before the repayment deadline, borrowers will receive a reminder message, and once the advance has been repaid by all the participants, Cinch will convert the money into cUSD and then repay the balance using Moola Market.

Model courtesy of Celo.

Why DeFi?

In the past, banks have been the primary lenders of loans, earning interest on the repayment, but with DeFi, anyone can be a lender with transparent transactions happening in real time. This means an employer doesn’t have to register as a bank, or work through a bank, in order to offer salary advances to their employees.

Moola Market, Cinch’s DeFi creditor, is a liquidity protocol built on the Celo blockchain that democratizes access to yield and credit. Depositors actively earn yield that is paid for by borrowers who are able to take over-collateralized loans in perpetuity, or under-collateralized loans in the form of credit delegation or flash loans. Assets are custodied by a smart contract that is public, open-source, and has been audited. Additionally, DeFi gives you a global pool of capital to access, which smooths out borrowing rates to allow for lower interest rates.

DeFi also allows a scalable architecture that can integrate cleanly with Cinch’s internal systems, reducing the administrative burden. Joining the Cinch ecosystem, either as a land leasor, casual worker, or full-time team member provides a clear path to larger, manageable credit secured against a borrower’s Cinch income.

Pilot launch, Kenya. Photos courtesy of Celo and Kotani Pay.

Our Hypotheses

This pilot will provide quick, affordable access to credit for landowners and employees, increase borrower satisfaction with Cinch, and drive financial resilience for smallholder farmers. This will be measured by:

  • Amount of credit accessed (and repaid)
  • Affordable interest rates
  • Net promoter score (NPS)
  • Quality of life improvements

This pilot will significantly reduce the administrative burden for Cinch to provide credit to its landowners and employees, allowing it to attract and retain landowners and casual laborers. This will be measured by:

  • Average number of salary advances processed per employee per day (pre vs. post pilot)
  • Total number of Cinch landowners (pre vs. post pilot)

Our Learning Questions

  1. What training/education is required to successfully introduce this product to smallholder farmer communities?
  2. What challenges emerge from deploying DeFi savings in smallholder farmer communities?
  3. How to design a user-friendly DeFi experience/interface for smallholder farmer communities?

By providing access to value-add financial services, such as credit, Cinch wants to attract new landowners to its core business offering and retain casual laborers and full-time employees. This pilot aims to illustrate an important use case for other employers looking to provide value-add services and drive financial resilience for their employees, and, as DeFi-enabled loans can be accessed through a smartphone by users who don’t have a bank account, scaling this service can play a key role in driving financial inclusion.

Stay tuned for updates, evidence, and insights on our other Mercy Corps Ventures pilots, responsibly testing DeFi solutions for unbanked and underbanked populations in emerging markets.