South African Fin-Tech company Launches Blockchain Initial Coin Offering to disrupt the lending market. The greatest agent for change in disempowered communities is access to capital and nowhere is this more apparent than in Africa and other emerging market economies.
Disclaimer: This is a guest post submission and does not reflect the views of Bitcoin Hub
Access to capital enables consumers to build homes, improve access to markets, education & services. It enables them to create wealth, build businesses or access health services not previously available, resulting in a sustainable improvement in the quality of life. In most emerging markets lenders suffer extremely high default rates, resulting in inflated interest rates. These costs have to be recouped and are blended into the overall business model of the lender.
Even in well regulated, economically and structurally sound emerging markets where capital is readily accessible, low-risk consumers are penalised. To offset poor lending practices these consumers have to endure paying higher interest rates, are subject to restrictive exit clauses and fees, in order to mitigate the risks for lenders against the poor elements of their debt books.
PSI’s systems manage the administration of millions of transactions monthly ensuring seamless & ethically processed payroll deductions for over 180,000 civil society and corporate employees in sub-Saharan markets through its Affordability Deduction Management Platform (ADMP). The ADMP system is proven, has been in-market for six years in countries including Uganda, Botswana, Malawi & South Africa and is earmarked for expansion to further developing markets around the globe.
Payment Solutions International conducted an internal research study to review the state of indebtedness within its consumer base and found startling results. PSI identified key financial megatrends and identified the need for urgent intervention to reverse the debt trap cycle that is driving otherwise good consumers into poverty.
How Private Market Credit Extension Should Function
PSI has noted that the consumers in its ecosystem have near a 99.6% collectability rate, which means creditors that process deductions from employers payrolls are virtually assured of collection. Despite this, the company found that most of these customers were underserved and were paying extremely high interest rates. As not all consumers have the same risk profile low-risk borrowers should receive preferential personalized service and rates, but the ADMP processed payroll deduction credit agreements were receiving the same market rates as generally available through retail lenders.
PSI inferred this to mean that the high-value clients in PSI’s ecosystem were being used cross-subsidize the risk of subprime loans issued to riskier borrowers. PSI approached various lenders to solicit responses and encourage them to adjust their interest rates, considering the lowered risk status and though lenders acknowledge the validity of the new lower risk model no significant change has been affected.
To drive change in the consumer lending practices PSI has created the PSI Investment Fund, which will be funded by means of a Cryptocurrency Initial Coin Offering (ICO). The first round of the ICO to be held in October 2018 aims to float 25 Million Preference Shares in Payment Solutions International Limited at a price of $1 each. These funds will be deployed through partner financial services providers into lower-cost loans for consumers within the ADMP ecosystem. It is the company’s belief that this will, in turn, create fiercer competition in the marketplace and drive down the cost of capital for all consumers, delivering meaningful change and greater access to low-cost capital for our customers.
Investors in the PSI ICO will earn dividends on the income of the company each year. Prior to the ICO, the company will be filing it’s registered prospectus in terms of the Companies Act and this will form part of its public offer for the subscription of shares.
For further information visit https://ico.psi.limited