12/31/2021 at 2:43 PM CET
Maria Refojos
In December 2020, the Spanish impact startup Ethichub reached one of its main goals: the launch of its own token, the Ethix, to support its financing project for unbanked small farmers. A year later, the company has managed to advance in the development of this ecosystem by closing an operation in which the means of payment has been strictly Ethix. As the company has just announced, at the end of November they closed the sale of 18.4 tons of coffee to the Barcelona roaster Cafes Gener.
EthicHub sells green coffee (which has not been roasted after being collected), to large roasters in the United States, Canada, China, the United Kingdom or Spain. The commercialization has helped them weather the storm of the pandemic and, since they implemented this service (also in 2020), they have already placed more than 140 tons of coffee. “We propose to eliminate links that do not add value so that the producer benefits from the final price of his product,” he highlights Gabriela chang, co-founder and CSO of the company. However, although it is an important bet and its technological development is part of the vision for the future, it is not the core of its business.
In June 2028, Ethichub launches a platform for crowdlending based on blockchain that connects smallholder coffee producers who do not have access to financing with potential investors from all parts of the world. Through smart contracts that collect the characteristics of the loan and the conditions in a transparent, traceable, “safe and unalterable” manner, an investor from Cuenca can contribute the amount of their choice to the on-site projects active on the platform. In return, it offers an annual return “of 8%” that is received when the credit is returned. “Plus the satisfaction of generating a positive change in the lives of the people you are financing,” he adds.
The counterpart is the risk of non-payment to which it is exposed, although according to the co-founder, it remains at very low levels: “During the first 2 years we had no non-payment, but we knew that at some point it was going to happen. To date we have given loans on the platform for more than $ 1.3 million with a default rate of less than 1% “.
And precisely this possible delinquency is what they have wanted to minimize with the launch of the token, within the chain of Ethereum, which works as a collateral or “collective guarantee”. Thus, this decentralized finance protocol protects the investment from impact when farmers do not comply to prevent “the credibility of the platform is affected. “In the words of Gabriela Chang,” of each loan from the platform, 4% is going to buy the token and it is deposited in the compensation system. When there is a small default, a few tokens are sold to compensate investors who could have been affected. With blockchain, these incentive loops are created that make things work well, because it is in the best interest of all participants. “
Funding comes mostly from individuals, who provide from 20 to 5,000 euros, Although they also have a modality for large investors starting at 10,000 euros, who can carry out transactions outside of the crowdlending platform.
As for farmers, on average they request about $ 1,000 a year in loans that are “70% cheaper”, Chang states. The counterpart is distributed between the originator (intermediary who is in contact with the farmer and local partner of the platform), which “costs, in annual effective rate, 16%”, and the producers themselves, who “in the case of Mexico and coffee specifically, it is 3% per month “, compared to the rates of between 8% and 10% per month that they normally pay with the cash loan system. In addition, when requesting the credit, the originator has to contribute 20% of the amount requested in Ethix “as a guarantee”.
Coffee farmer. | Assets
With new technologies, Ethichub wants to solve the problem of financial exclusion. As this entrepreneur explains, around 1,200 million people find themselves in the situation of having to resort to local moneylenders to continue their activity, because they lack valid or attachable guarantees. “For this excluded population, the only source of financing is cash loans at very high rates of more than 100% per year, and they are not even sufficient amounts to improve their productivity,” he says. This situation leads them to live in poverty despite having productive activities that can be profitable: “In the specific case of coffee, 80% of world production is in the hands of these people, and a small coffee farmer has one hectare or hectare and a half & mldr; “.
Currently the web contains four projects that admit contributions, all from farming communities in Mexico, but they also work with coffee growers from Brazil and Honduras. In addition, Chang ensures that the platform is open to other products, such as cocoa, and that they are already working with projects in Southeast Asia and Africa. “We have already validated our model, we have shown that it works & mldr; Now comes the stage of expanding it to more regions”, raises. To do this, they hope to close a financing round of 2 million dollars in the first quarter of 2022 that will be used to continue implementing efficiency and operability improvements in the platform and expand its network of originators, among other plans.
“We already have a commitment of at least five funds, but the process is long. The full round is $ 4 million. “says the co-founder. This regenerative economy social startup, which according to Chang grows at a rate of 10% per month, trusts that this boost will help them improve their behavior in a “substantial” way.