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AvalDAO: Facilitating Access to Credit in Latin America Using Rootstock

AvalDAO: Facilitating Access to Credit in Latin America Using Rootstock

With the aim of supporting those who cannot access credit by traditional means. The El Futuro está en el Monte network, the ACDI (Association for Comprehensive Development), and RootstockLabs are launching AvalDAO, a lending fund based on Stablecoins. The first stage will be implemented in the Gran Chaco Americano region, which is divided among Argentina, Paraguay, Bolivia, and Brazil.

RootstockLabs is pleased to announce the launching of AvalDAO in Latin America, a novel financial instrument designed to offer guarantees for those who have trouble accessing credit. The first stage is directed toward organizations and coops in the Gran Chaco Americano region that require financing to improve their production and their living conditions

AvalDAO has built the first guarantee fund based on Stablecoins, which are based on Rootstock blockchain. The participants in said fund are crypto investors who wish to put their tokens to work by helping real-economy initiatives in exchange for interest payments. The goal is to reduce one of the principal obstacles businesses face when trying to access credit: credit guarantee requirements.

There are in Latin America thousands of entrepreneurs, small businesses, and medium-sized businesses who exist outside the traditional financial system. It is estimated that approximately half of the adult population over the age of fifteen still does not have access to any financial services. This gap is wider in the most vulnerable sectors of the population and highlights strong ethnic and gender inequalities,” explains Mauricio Moresco, director of the ACDI.

The investment fund emerges as an alternative to overcome the geographical (rural, remote, and sparsely populated areas) and socioeconomic (gender, and ethnic discrimination) limitations that prevent the population from accessing credit. “There are constant limitations that arise from informational issues, such as credit guarantee requirements, documentation, and high costs, which a large part of the population cannot readily confront,” comments Agustín Pandolfini, head of Social Inclusion Initiatives at RootstockLabs.

AvalDAO emerges thanks to an initiative taken from the El Futuro está en el Monte network in conjunction with Rootstocklabs, BID Lab and ACDI, who are developing decentralized digital financial instruments to contribute to the protection of public goods, such as the forests and the cultures of the Gran Chaco Americano region.

Right now, a proof of concept trial is taking place in the province of Chaco, where the guarantee fund AvalDAO is backing credits for improving living conditions. In real terms, families are now able to purchase in installments materials essential to the construction of 16,000 liters of cisterns for access to safe water.

In the region of Gran Chaco, many rural families still struggle to access clean water. They either have to travel several kilometers to get clean water or use inadequate water sources that cause illnesses, especially in children. In this region, women typically spend 2 to 4 hours daily to acquire the water they need for their homes. In the context of the COVID-19 pandemic, access to water has become a priority.

“Even though many of these families cannot afford to buy these construction materials in cash with their monthly salaries, they are able to afford them if they have access to adequate financing.” Sadly, these families do not yet have access to the banking system: they do not have credit cards or formal work, which would allow them to have paystubs to use as guarantees. In this situation, they are excluded from the financial system. AvalDAO is providing them with the guarantee they need for the local construction material suppliers and for the organizations that grant them credit. “They already have the materials and have begun constructing their cisterns,” comments Horacio Duk, who heads the coordination of El Futuro está en el Monte’s work in the area of Chaco known as El Impenetrable.

AvalDAO is building the technology stack to complete this financial instrument and generate the confidence needed to bring unacquainted parties together. This is achieved by using two innovative tools: the automation of a protocol for executing guarantees through smart contracts and the creation of reputation-based identities. A person’s credibility backing will be based on their history of complying with agreements, on the way they exercised their liberties, and not on a credit risk report. This behavior will be registered in a unique, inalterable report built with blockchain technology. This way, individuals and micro-, small and medium-sized businesses that have until today been excluded from financial systems will be able to take advantage of opportunities afforded by credit to better their living conditions and to undertake ventures.

AvalDAO aspires to become a decentralized autonomous organization (DAO) this way. It is a revolutionary way to build organizations and to make them work using smart contracts and blockchain technology, providing transparency, immutability, autonomy, and security to investment and credit guarantee operations.

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About RootstockLabs

RootstockLabs develops the blockchain technologies necessary for a new global financial ecosystem that can foster opportunity, transparency and confidence.

Rootstock is the first, biggest, and longest lasting Bitcoin sidechain. It is the only Bitcoin layer 2 that combines the security of Bitcoin’s proof-of-work, with Ethereum’s smart contract capabilities.

Rootstock is open-source, EVM-compatible, and secured by over 60% of Bitcoin’s hashing power, which makes it a gateway to a vibrant ecosystem of dApps that continues to evolve to become fully trustless. 

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About ACDI

This public interest group based in Santa Fe, Argentina, carries out several social projects to set individuals’ freedom in motion so they might become the protagonists of their growth in all areas: material things, relationships, spirituality.

More information at: @ACDIargentina

About El Futuro está en el Monte

This is a movement that boosts business models in the Gran Chaco Americano region to promote sustainable, inclusive and competitive development through revitalizing the region’s natural and cultural capital, combining innovation with local knowledge. El Futuro está en el Monte has garnered the support of IDB Lab for the development of innovations that collaborate with the protection of native forests and with the social inclusion of vulnerable social groups

More information at: @futurodelmonte

About IDB Lab

IDB Lab is the innovation lab of the IDB Group, the main source of financing and knowledge for development that focuses on improving lives in Latin America and the Caribbean (LAC).

More information at: @idblab @idb_lab