A blockchain start-up has so far raised US$3 million from private investors and will open its ICO to the public this month in the hope of raising it to US$15 million to develop microfinancing services palatable to Muslims and non-Muslims alike using Ethereum technology and artificial intelligence (AI).
Everex is on a mission: it wants to enable the underbanked (some two billion individuals globally) of the developing world to access affordable financial services anywhere in the world. Central to this mission are distributed ledger technology, mobile infrastructures and machine learning software.
But using Ethereum and AI to address the issue of financial inclusion is only a small part of the overall equation, Jean-Baptiste Decorzent, Everex Global’s director of inclusive finance and strategic partnerships, tells IFN Fintech. “The issues our initiative is addressing are complex, but not complicated. We do believe this complexity could only be addressed by building strong partnerships.”
Incorporated last year, Everex initially focused on remittance services using its Cryptocash, which is not a new digital currency but rather a digitization of any existing national currency on the Ethereum blockchain. The idea is relatively new and Everex was among the first to utilize such a concept (it was also one of the first to build applications on Ethereum): Singapore only recently completed the first phase in tokenizing its currency.
“About 18 months ago, the blockchain landscape was completely different and a year ago, regulations on this hardly existed,” shared Decorzent. “We knew we were walking on eggshells because nobody had done it, but we needed to, and did it anyways.”
Designing the technology with migrant workers – who are generally unbanked – in mind, it was important to Everex to make the transfer of money cheaper, faster and more secure. Everex could not convince any regulators to come on board a year ago, and so, the start-up invested its own money into building the system and in September 2016, ran the first pilot between Thailand and Myanmar which proved to be successful, transferring an aggregate amount of THB850,000 (US$24,975) for hundreds of migrant workers from Thailand to Myanmar. By using blockchain, the firm was able to slash the service fee by three times to 3% and decrease the transfer time significantly.
For its groundbreaking work, the start-up was recognized for its innovation at the UN in New York recently. It has also been invited by the Bank of Bangkok to participate in a fintech program.
Now, the firm is focusing on microcredit. “Microfinance institutions worldwide charge an average 35% interest rates on loans and in some cases it can go up to 50% – that to me is robbery. We want to drop that to 10%,” Decorzent said. He is, however, cognizant of the high cost incurred and great risks undertaken by microfinanciers which is why the start-up is now fundraising.
Previously raising US$3 million from 600 private investors in seven days, Everex will launch its ICO on the 24th June (capped at US$15 million). Proceeds will be used to develop AI, a crucial element in optimizing microfinance as most clients would not have sufficient financial data or credit history.
“Through AI, individuals would be able to prove their line of credit through traditional financial institutions and AI would also help build the risk profile of borrowers,” Decorzent explained.
To close its ICO in August, development will commence soon after with a view to conducting its first pilot project within six months. “Microloans are more complex as compared to remittance and realistically speaking, we should be able to launch the pilot project in February 2018,” said Decorzent.
In addition to microfinance, the company is also currently working on an initiative to implement blockchain for livelihood and cash-based transfer (CBT), more specifically about facilitating women to access seed and capital for their ventures through ‘women entrepreneur impact funds’. These funds will allow women to access seed (grants) and capital (investments) for their ventures in emerging and frontier markets, empowering women to start/develop/re-start their business by facilitating them to access financing – using Cryptocash.
“The plan is to establish a multi-stakeholders open-source blockchain Ethereum CBT and access to capital platform for multilateral organizations, public and private donor agencies, implementing agencies, financial institutions and targeted population,” Decorzent expounded.
And of course, as an advocate for financial inclusion, making all its offerings Shariah compliant is key. The firm has sought advice from an Islamic bank on its compliance.
“Everex intends to establish and maintain Shariah compliance during operations with Islamic customers. Among the methods slated to be used in compliance are flat-rate lending smart contracts which align with [the] prevention of Riba Qard, growth due to interest outside the scope of an agreement and Riba Jahiliyyah, debt growth in response to defaulting on payments,” according to the start-up.
Securing an official Shariah certification is “most definitely” in Everex’s future plan. “We are not specialists in Islamic finance which is why we want to engage with industry experts and seek guidance on which is the best way forward.”
At the moment, the initiatives are still under the umbrella of Everex; however, it is likely that they would be parked under a foundation due to the nature of the work which involves partnership with governments, private foundations, international organizations and multilateral development agencies such as the UN and the International Red Cross.
“Financial exclusion is a big challenge and nobody can do it alone. If we fail, we really do hope somebody else will be successful,” shared Decorzent.