Brú Finance aims to build an open financial ecosystem that serves the 1.7 billion unbanked or underbanked individuals and small businesses in emerging markets by bridging the $8tn credit gap. They offer a fixed-income DeFi protocol to integrate asset-backed bonds from these markets into the DeFi system
For the last 25 years, the number of people living in extreme poverty has been steadily declining until 2020, when poverty rose due to the disruption caused by the COVID-19 crisis. According to the data from credit Suisse, individuals worth more than $1 million constitute 1.1% of the world’s population and hold 45.8% of the global wealth, while on the other hand, 55% of the population holds only 1.3% of global wealth. The current financial ecosystem rewards the rich and punishes the poor. Brú Finance is relentlessly working to bridge the gap between the rich and the poor.
We have carefully selected the name Brú Finance for our organization. The word Brú comes from the Old Norse language and means the bridge. Brú Finance is a bridge between the global north and the global south. It’s a connection between capital providers and capital seekers, emerging and developed markets, un/underbanked, and wealth-holders. Brú Finance brings capital to people who need capital and can deploy them to productive assets or business usage. By doing this, we are making a Global open-financial ecosystem that allows people from any geographical location to connect to our platform.
Recently we have moved USD 15 million worth of tokenized agri-commodities to the Polygon Testnet. It is just a step toward building an Open Global Financial ecosystem that harnesses the power of DeFi. The mission of Open Finance is financial inclusion, reducing the cost of financial services, and eliminating intermediaries. But Open Finance will not achieve this objective if it remains a mere extension of the traditional Banking System.
On the other hand, DeFi offers financial services that solve the problem of traditional finance and provides products and services by leveraging blockchain capabilities. Liquidity pools, decentralized exchanges, tokenization, and non-custodial platforms enable DeFi applications to deliver financial services autonomously and in a composable fashion.
Brú Finance has brought Open Finance and DeFi together to materialize the vision of financial inclusion. DeFi makes the financial ecosystem genuinely open. Brú Finance, a fixed-income DeFi protocol, is bringing emerging markets’ asset-backed bonds to Decentralized Finance. Brú Finance DeFi protocol pushes past the traditional financial universe’s geographical restrictions and boundaries. With its DeFi-based lending and real-world assets-based borrowing, Brú Finance has opened doors of financial inclusion for the weakest segments of society, such as farmers, women groups, artisans, and small businesses.
Growth in the agriculture sector is two to four times more efficacious in raising incomes among the poorest than in other sectors. A 2016 study found that 65% of poor working adults made a living through agriculture.
Agriculture is also crucial to economic growth: In some developing countries, the agriculture sector accounts for as much as 25% of GDP.
Globally, two-thirds of the working poor make a living through agriculture, and smallholder farmers produce one-third of the world’s food. But Irony is that 235 million farmers, including 115 million women, are unbanked, keeping them invisible to financial institutions.
Access to traditional credit sources is a significant problem for smallholder farmers due to the lack of documented land rights, income, and other collateral. Additionally, distress sale of harvest by farmers due to post-harvest localized demand-supply mismatch is a sad reality of the agriculture sector resulting in the low income of farmers.
Brú Finance platform is already accessible by 18,000+ farmers in India, and in total, the platform has tokenized Agri-commodities worth USD 600 million. Farmers collateralize tokenized commodities and gain instant access to credit on Brú Finance’s platform. Timely access to credit helps farmers to earn the proper value of their products, improve farm productivity, the efficiency of operations, and last but not most minor, overall prosperity.
After farming, small businesses are responsible for more than two-thirds of all jobs worldwide. They also account for the majority of new job creation. But despite providing a considerable share of global employment, SMEs still face significant challenges such as unavailability of high-quality raw materials, shortage of skilled workers, operational inefficiency, lack of marketing, and more. But the most damaging one is the unavailability of credit. Many small businesses have poor creditworthiness, which hinders credit accessibility. As a result, 131 million or 41% of traditional MSMEs in developing countries have unmet financing needs. The MSME credit gap in developing countries is estimated to be approximately $5 trillion, 1.3 times the current MSME lending level. Women-owned businesses compose 23% of MSMEs and constitute 32% of the MSME finance gap.
Moreover, MSMEs have very long receivable cycles; sometimes, these cycles can be longer than a year. Such instances may halt business operations due to a lack of funds to fuel the operations.
Brú Finance has initiated Receivables based financing for small businesses, which involves using the borrower’s accounts receivable (credit) sales to secure short-term loans. Brú Finance has opened up the credit line for this small business by capitalizing on a global capital pool of capital accessible on its DeFi protocol.
There are over 200 million artisans worldwide. 74% of all artisan enterprises have female founders, and 62% live in towns or rural settings, away from major urban centres. Many artisans’ households have been involved in the same vocation for generations. They struggle with low income, seasonality of demand, lack of high-quality raw material, illiteracy, and lack of information. Hence all this manifests into weak financial power and an inability to get bank loans. Artisans depend on money lenders for their financial requirements, who charge exorbitant interest rates on this loan.
Brú Finance has opened up access to the global capital pool for artisans, where artisans can tokenize and mortgage their products and obtain credit instantly.
Globally, women’s population is more than 3 billion, representing 49.58% of the world population, of which 42% of women do not have bank accounts, 74% do not have formal savings, and 90% do not have access to formal credit. Moreover, women’s financial inclusion is an uphill task due to legacy issues such as gender bias, role in the family, nil to irregular income, lesser access to technology, inability to mobilize, and many more.
Many women in rural and semi-urban areas have established cooperative groups, undertaking small business activities such as pickle making, weaving, handicrafts, and more. However, the challenges of these women groups are the same as artisans and farmers. Many of these women never accessed any financial services or earned any money; hence their creditworthiness is non-existent. Moreover, these women groups have no access to financial services and credit lines. Thus expanding their small businesses and improving their economic status is a backbreaking task.
Brú Finance enables these women groups to access the open financial ecosystem where they can instantly get credit by mortgaging tokenized products such as their inventories and receivables.
Brú Finance is continuously working towards the goal of financial inclusion for everyone by harnessing the power of tokenized real-world assets on DeFi. The United Nations (UN) set financial inclusion as one of the main goals in the Millennium Development Goals (MDG) to achieve sustainable development and improve world welfare. As stated in the EY report, “Driving greater financial inclusion — the availability of affordable, accessible and relevant financial products — will generate sizeable economic benefits, according to the report, boosting GDP by up to 14% in developing economies such as India, and 30% in frontier markets such as Kenya.”
Brú Finance has brought DeFi to the mainstream and the underprivileged segments of society. In addition, Brú Finance contributes to the social well-fare and financial inclusion of credit invisible strata. Brú Finance is creating a multi-faceted impact, and here is a small snapshot.
Brú Finance is a decentralized lending protocol designed to bring real economic activity into a decentralized ecosystem without using digital/synthetic assets that create investor risk and exacerbate the volatility caused by unfettered speculation. Brú Finance is deconstructing the traditional finance (TradFi) paradigm by unlocking new sources of capital with decentralized finance (DeFi) to create a more equitable lending system. We are currently live across a decentralized network of 1400+ custodian warehouses in a potential market of Maharashtra, India, with 15 Million farmers. As we advance, we will expand to other parts of the country and to the international markets starting with the South-East Asian, African, and European Market.
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