Satchel: Using DeFi to help unbanked communities generate income
There is not equitable access to financial services around the globe. In high income countries, access to a bank account, a credit card, and loans are often taken for granted, but the reality is that billions all over the world don’t have access to these traditional financial instruments and services.
In fact, according to UNICEF, 31% of adults around the world are unbanked. There are many reasons why this could be the case, including a lack of financial infrastructure in rural or developing communities, a lack of access to the documentation needed to open a bank account, or a lack of opportunities to develop credit which would enable individuals to obtain a loan or credit card.
Over the past couple of years, the Decentralized Finance (DeFi) movement has made enormous strides in working towards a world where everyone, regardless of where they were born, has the ability to access financial instruments and services to improve their lives. As internet and mobile penetration continues to grow around the world, the case for DeFi only grows stronger, as more communities have the means to access DeFi services.
One project looking to take advantage of this momentum and develop a ground-breaking DeFi platform for unbanked communities is Satchel, a project developed by Blockchain at Berkeley with the support of UNICEF.
The Satchel platform is an open sourced mobile application that allows communities to pool their funds together, which they can then lend out through the platform to earn interest. The interested generated through the loaning of funds can go back to the lender as a form of income, or can be used to make improvements to local communities. Without access to traditional financial services, the ability to earn passive income through interest has long been out of reach for underprivileged communities, but Satchel is looking to change this.
The inspiration for Satchel came from the realization by the team at Blockchain at Berkley that that the salaries of many around the world, especially those in developing countries, were losing value each year due to inflation. After digging a bit deeper, they realized that some individuals were moving their income in to crypto to hedge against inflation, and the idea was born!
The focus of the Satchel platform is on enabling communities to come together and crowdfund improvement in their local communities, by pooling their funds together and gaining interest. The initial focus of Satchel was on raising funds to support schools and the communities surrounding them, but the future use cases go well beyond this.
The Satchel team provides the following example for how Satchel could be used in this context:
Parent of student at a school provides $100 USD to Satchel
Satchel lends out the $100 USD using the DeFi Service to earn between 3% and 5% per year on the principal amount
At the end of the year, the parent receives the earned income (e.g., 4% of $100 USD to provide the parent $4 USD)
The earned amount, $4 USD, is split 50/50 between the parent and the school
In the future, Satchel hopes to continue scaling the platform while focusing on three key growth areas of “enabling communities to organize events to raise more funds through the app, enabling people from around the world to donate funds to communities of their choice, and enabling other users to join the platform and leverage the borrowing and lending capabilities”.
For more information on Satchel, check out their depository on GitHub.
What are some of the other potential applications for this DeFi project? Tweet us at @Crypto_Altruism, we’d love to hear from you!
