With all the crypto hype being channeled to the Web3 space in the last few months, we have witnessed increased crypto lending institutions. But most of the loaned cryptocurrencies are going in the pockets of people who have a good holding in the crypto space. In such a market, startups like Goldfinch are preparing to tap the potential of developing nations, where centralized financial systems are not enough to meet user needs.
The Bay Area crypto startup Goldfinch is working towards a protocol that lets organizations borrow crypto without having a large crypto holding. At present, most crypto lending platforms depend on the collateralization of existing cryptocurrencies to make sure the borrower is a safe bet. The need for over-collateralization for safer lending turns away a significant number of potential borrowers who don't hold a sizable amount of crypto. Goldfinch wants to take a blended approach by providing organizations with crypto loans based on non-crypto collateral.
The startup recently received funding of $25 million from Andreessen Horowitz's a16z crypto. Goldfinch is also backed by other crypto giants and investors such as Coinbase, SV Anger, Ventures, Heli-cap, and Bill Ackman. Mike Sall and Blake West, the founders of Goldfinch, worked together before at Coinbase back in July 2020. They started Goldfinch with a vision of expanding borrowers' access to funds and bridging the gap between lenders and borrowers.
Goldfinch is currently ignoring the US market and focusing its investments in developing nations, where getting loans is a challenge. Goldfinch's DeFicredit protocol provides the highest volumes of loans to Kena, Nigeria, Uganda, and the Philippines. Loan origination and servicing are taken care of by lending businesses, which can withdraw funds from the pool and lend it to local borrowers. Investors can also deposit cryptos in the Goldfinch pool to earn a yield. When lending businesses make interest payments, the money is distributed among all the participating investors.
The company is reported to have over $39 million worth of active loans provided to more than 230,000 end-users in 18 countries. Be it motorcycle taxis from Kena or small businesses in India; Goldfinch capital is used worldwide for various applications.