Source: iStock/hadynyah

In a bid to launch the first African blockchain platform to raise funds for microfinance, Kenya-based 4G Capital aims to begin issuing tokenised bonds worth USD 10 million at the end of this month. The funds are to be used to stimulate the development of micro and small businesses in Sub-Saharan Africa.

Tokenised bonds are financial instruments that allow investors to purchase them with cryptocurrencies.

Under the plan, the bonds are to be offered to investors willing to pay in bitcoin or ether, issued on a platform operated by Canada’s Finhaven, a blockchain-powered securities exchange.

“We may accept payments in additional crypto and fiat currencies in the future,” Anthony Nicalo, the co-founder and chief revenue officer at Finhaven, told Cryptonews.com.

The tokenised bonds are to facilitate international expansion, according to Lydia-Claire Halliday, the spokesperson for 4G Capital. Raised funds will be paid to the company as a debt investment via Finhaven in US dollars. The Kenyan firm will use this capital to provide loans to micro and small enterprises in Africa. The profits from these operations will allow to repay the loan.

In 2013, the company launched its operations in Kenya, and this month, it expanded into neighbouring Uganda. Within five years, the business aims to establish a presence in seven countries across Sub-Saharan Africa.

USD 40m in 12 months

“4G Capital specialises in the holistic approach of scaling micro and small enterprises. By providing business training in combination with working capital, they ensure their clients are provided with the ways and the means to succeed,” Halliday said.

Before new clients are accepted, they are tested for business viability and legitimacy. First loans are accessed within 24 hours, and repeat loans within 2 to 3 minutes. Business training is provided to clients through various face-to-face and digital channels.

4G Capital claims that it consistently achieves repayment rates of more than 94% at due date without refinancing its clients. Of these, 82% are female, and more than 80% of transactions is repeat business, mainly in rural areas.

To date, the lender has provided loans to more than 25,000 businesses across Kenya. The typical size of a loan is USD 120 over a period of 19 days. The maximum term for such loans is 30 days. The company says it is forecast to lend some USD 40 million to small and medium-size businesses over the next 12 months. This would allow the lender to significantly expand the scope of its operations as the company has provided about USD 26 million worth of loans to its customers.

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Context

Africa pays premium for cryptocurrencies

Processing of international payments in “an African country such as Zimbabwe is impossible for most people” and, “for the few that can, [is] very painful, time-lengthy and expensive,” according to the Zimbabwe-based cryptocurrency exchange Golix.

This said, the exchange admits that, based on its two-year observations, “although the volume that was traded [in Zimbabwe] has been constantly growing every month, the price of bitcoin there has almost always been around 10% higher than it is on other international exchanges. And many times it’s significantly more.”

Golix provides three explanations why Africans could pay more for bitcoins than buyers in other countries worldwide: the insufficient cryptocurrency liquidity in many African markets, the excessive demand that thwarts supply, and the fact that bitcoin is a better mean of transferring money from Africa abroad than many of the local currencies, as African banks often restrict access to such operations to their customers.