Ejara
Developed in partnership with Mercy Corps Ventures
Ejara and Mercy Corps Ventures piloted a DeFi fractionalized bond savings product to increase financial access for low-income and underbanked communities in Cameroon.
Website: https://www.ejara.io/en
HQ: Douala, Cameroon
Active Markets: Africa
Problem Addressed
Across Africa, there are limited savings and investment opportunities that low-income individuals can access or afford. This is especially true in Francophone Africa, where usage of financial services is still among the lowest in Sub-Saharan Africa. Coupled with a significant mistrust in financial institutions, and prohibitive minimum investment requirements for high-yielding, low-risk investments such as government bonds, this means that few individuals have access to opportunities to grow their savings with a cushion against market volatility and inflation.
Project Description
In August 2022, Mercy Corps Ventures launched a pilot in partnership with Ejara, a Cameroon-headquartered crypto investment platform, to test a new savings offer: fully compliant, licensed, tokenized, fractionalized government bonds as a savings plan for low-income individuals. Participants in the pilot were offered the opportunity to invest in as little as $1.53 (1,000 CFA) earning up to 5% interest per annum. Blockchain fractionalization and smart contracts allow for assets to be split up infinitely and administrative processes to be automated, significantly lowering barriers for users. After acquiring an asset manager license from the Bank of Central African States, Ejara was able to buy, fractionalize, and sell government bonds to pilot participants at much lower prices than previously offered. Participant savings plans earned daily interest on deposited funds, recouping principal at maturity.
Ejara’s customers could either access the product directly through their app or be reached through in-person training led by local agents. These agents drove from city to city with community leaders in Cameroon to lead offline acquisition and manage pilot operations. Alongside this financial education component, the service offered in the app also removed a barrier to entry, as users didn’t need to travel to a bank or pay account opening and maintenance fees, and could easily track their transactions and balances from their mobile devices. Users also retained flexibility to withdraw their full principal investment at any time. If the withdrawal occurred before the bond’s maturity date, the accrued interest would be reduced but would have no impact on the principal. This was implemented to incentivize better savings behavior and long-term financial planning.
Ejara’s pilot product offered around double the yield that traditional bank accounts do — an increase from about 2.5 to 5%. The use of blockchain increased flexibility and transparency: users did not have to appear in person to use this product, as is the case with legacy products, and they benefitted from the ability to withdraw funds whenever they wanted.
Business Data
Status: Active
Constituency Served: historically excluded groups, underbanked, low income people
Networks: N/A
Known Investors: Mercy Corps Ventures
Additional References: Mercy Corps Ventures endline report on the pilot.
Progress to date
The pilot brought down the buy-in minimum for government bonds by more than a thousand times (from $1,600 to as low as $1.53), and reached over 11,000 individuals. 46% of users reported that the pilot represented first-time access to such savings tools.
Business Model
Efficiencies gained by using crypto rails permitted for traditional transaction fees to be collected while still providing a higher-yield product.
Traction
The pilot provided first-time access to a savings product of this type to nearly half of the 11,490 individuals the pilot reached. To date, over USD$245,000 in value has been saved by users. 52% of users reported having more control of their finances as a result of the pilot.
For informal entrepreneurs (merchants), having funds available for emergencies was the primary motivation for saving. Mercy Corps Ventures found that 64% of early withdrawals among merchants were because of emergency situations and 40% of those who did not withdraw early cited “emergency” as the reason for continued saving. For tech-savvy users, rate of return and profits matter the most. Almost 40% of tech-savvy users reported that better interest rates and more profits would encourage them to hold the bonds to maturity. Additionally, 51% highlighted “the opportunity to invest” and “desire for an alternative financial strategy” as their key reasons for signing up.