Brazilian farmers face a problem that has been classified by the Credit Data Alliance (CreDA) as a “credit paradox”. When borrowing from financial institutions, much of the relevant information is left out, which limits the amount of capital that agricultural producers can raise to finance their operations.
CreDA’s Credit4Good initiative is partnering with Brazilian farmers to provide credit analysis and loans more in line with their realities. This process is based on blockchain technology.
Blockchain in real life
Brazil is the powerhouse in the agricultural scenario of the world. The country is currently the largest exporter of soybeans and the second largest exporter of sugarcane. Fakhul Miah, CEO of CreDA and former Morgan Stanley, assesses that there are tools to provide larger lines of credit to Brazilian farmers. What is lacking, however, is better analysis of specific data.
“In practice, the credit models currently applied in the sector do not take into account the current and potential value of the agricultural assets against which farmers secure their loans,” says Fakhol Miah. “These assets will include not only the land and equipment, but their quality and farming practices used by each farmer, as well as their farming and business history,” he adds.
CreDA is already in the field of decentralized finance (DeFi), offering lending solutions through a system that uses the blockchain. Now, this model has been changed to adapt to the reality of loans to agricultural producers. Through the company’s credit oracle, the data is measured, which traditional institutions ignore.
“We’re setting ourselves apart with programs like Credit Analysis that are more accurate, where we can use the geographic data of the Earth to form a user’s credit score,” says Miah.
In-depth analysis of credit indicators, combined with blockchain technology, in addition to allowing for a more extensive line of credit, facilitates access to the unbanked. “The credit score is issued as an NFT linked to the user’s wallet. Thus, even those without a bank account can be registered, through the blockchain, to legitimize their assets and creditworthiness.”
In addition, CreDA plans to run a “learn to win” model with farmers starting to use Web3 and the cryptocurrency market.
“We are partnering with organizations in Brazil to develop a learn-to-win education system that rewards farmers with cryptocurrency while they learn more about wallets, transactions, betting, mining, etc.,” says CreDA CEO.
With or without encryption
Although it is based on DeFi concepts, with an emphasis on immutability and transparency, Credit4Good is not limited to cryptocurrency lending. Vakhol Miah says Krida works with credit experts from the traditional financial market, creating a bridge between decentralized finance and the centralized world. Therefore, it is possible to make loans through fiat currencies, or even stablecoins.
The presence of companies that bridge the digital economy and traditional finance has grown in recent years. The sector, called Real World Assets (RWA), is considered by companies and experts to be one of the strongest narratives in the cryptocurrency market for 2023.
While it does not tokenize physical assets, Credit4Good converts credit scores into NFTs, making it easier for farmers to obtain loans. In this way, the company can also be seen as part of the effort that unites the two worlds.
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