Xend Finance Leverages DeFi to Combat Currency Devaluation in Africa

Nigerian startup Xend Finance is utilizing decentralized finance (DeFi) as a solution to the pervasive issue of currency devaluation. DeFi seeks to create a connection between the world of decentralized blockchains and traditional financial services.

Founding and the Problem of Devaluation

Founded in 2019 by Aronu Ugochukwu and Abafor Chima, Xend Finance was born from a personal understanding of the challenges posed by rapidly declining currency values. Ugochukwu, in particular, has direct experience with the impact of this economic instability.

Currency devaluation represents a significant economic hardship for many nations in Africa and other developing regions globally. Consequently, organizations like credit unions are increasingly seeking methods to protect their collective funds from the effects of local currency depreciation.

Ugochukwu explained to TechCrunch, “Nigeria has seen three substantial currency devaluations in the past three years, a situation mirrored in numerous economies with unstable financial systems.” He further elaborated on his personal experience, stating, “My mother and I participate in different cooperatives, making regular savings contributions to support one another. We realized that despite consistent saving, the value of our money was diminishing. This realization was the catalyst for Xend Finance.”

Mainnet Launch and Access to DeFi

The company recently announced the launch of its mainnet, enabling credit unions to provide their members with access to DeFi through the use of decentralized stablecoins, including DAI and BUSD.

Xend Finance isn’t simply focused on protecting credit unions from financial fluctuations; it’s also fundamentally altering their operational model.

Traditionally, these unions involve groups of individuals pooling resources for mutual benefit. However, they often face limitations.

• Limited reach – access is typically restricted to a small, local network.
• Lack of insurance – this can deter participation in savings cycles.
• Payment defaults – member defaults can negatively impact overall payouts.

Blockchain-Based Solutions

Xend Finance is addressing these shortcomings through the implementation of blockchain technology. The platform facilitates membership of over 1,000 individuals, regardless of geographical location.

Smart contracts are employed to secure each member’s contributions and enable flexible payouts when a payment cycle concludes, thereby reducing the incidence of default payments. The company also provides decentralized insurance to safeguard members against potential asset loss resulting from contract failures, though this differs from conventional insurance policies.

Furthermore, credit union members can potentially earn interest on their savings by converting their crypto or fiat currency into stable cryptocurrencies and locking these assets on lending platforms. The company estimates a potential annual percentage yield of up to 15%.

First of its Kind

Xend Finance claims to be the world’s first decentralized finance (DeFi) credit union platform and the first DeFi company originating from Africa. Its technology is built upon the Binance Smart Chain (BSC), a blockchain designed for developing high-performance decentralized applications.

Funding and Partnerships

The startup, based in Enugu, Nigeria, participated in the Google Launchpad Africa accelerator and the Binance Incubation Programme in 2019. Since then, it has secured $2.2 million in funding from investors including Binance, Google Launchpad, NGC Ventures, Hashkey, and AU21 Capital.

Between December 2020 and January 2021, Xend Finance conducted a testnet with over 1,500 participants across 75 countries. This testing phase helped refine the product-market fit, and a beta launch of the mainnet last week resulted in over $500,000 in deposits. A partnership with TechFusion Africa, a software service provider with 5,000 members, was also established.

Future Plans and Revenue Model

Ugochukwu states that the company’s immediate focus is on customer acquisition, with revenue generation planned for the future. The intended revenue model involves charging a commission – capped at 5% – on the return on investment for savings and contributions made on the platform.

Following extensive testing and iterative improvements, Xend Finance is now publicly launching, with Changpeng “CZ” Zhao, CEO of Binance, anticipating that the platform will demonstrate the potential of the BSC ecosystem.

Zhao commented, “Africa is a crucial continent, representing the future and the rise of DeFi and blockchain capabilities. We are thrilled about the mainnet launch of Xend Finance, a team we supported early on that has a strong presence in Africa and champions the capabilities of Binance Smart Chain. Their platform can provide stable currency and DeFi investment opportunities to those who would otherwise lack access.”

$XEND Token and Governance

Alongside the mainnet launch, Xend Finance will introduce the $XEND token through a Token Generation Event (TGE) on Balancer. The token will incentivize user participation within “the protocol” and enable decentralized governance of the Xend Finance ecosystem.

Ugochukwu believes Xend Finance offers individuals the opportunity to safeguard their savings in stablecoins, mitigating the risk of overnight devaluation, while simultaneously earning higher interest rates through DeFi. He concluded, “We are excited about the positive impact blockchain will have on the people of Africa.”