Descent Vault is a protocol used to issue Dollar-Backed Currency notes (DBCN) that maintains a 1:1 peg to the value of African fiat currencies.

The first of which is xNGN that maintains a 1:1 peg to the NGN. Each xNGN is backed and overcollateralized by a USD Stablecoin starting with USDC

<aside> 💡 1 NGN = 1 xNGN

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Why do we need DBCN?

An overview of lending

Credit is vital for economic survival. Many businesses need them at various points in their lifecycle to power up economic activities ranging from production to employment or meet other specific business goals. More importantly, access to credit is a critical enabler for the growth and development of MSMEs [micro, small and medium enterprises].

The MSME credit market, however, is notoriously characterized by market failures and imperfections. In emerging markets 55–68% of formal SMEs are either unserved or underserved by financial institutions, leading to a total credit gap of ~$4.9 trillion, according to CGAP. Nigeria's MSMEs financing gap is the second-largest behind Brazil. According to the World Bank, Nigeria's financing gap for MSMEs is estimated at $158.1 billion. The lack of structured or organised information through a single source on how to access finance further compounds the MSMEs challenges associated with funding.

In Nigeria specifically, 22% of the country’s 41.6 million SMEs identified obtaining finance as their biggest challenge in PwC’s 2020 survey — only 4% of MSMEs have access to credit in Nigeria. An EFInA report shows that 51% of Nigerian adults want to invest in a business. Yet, few Nigerians take bank loans to meet their goals. The same report recorded that only 5% of Nigerians used loans from formal institutions to meet their goals. A huge number (26%) did nothing, while about 40% used non-financial mechanisms such as working more.

Credit products facilitate growth and improved stability for micro and small businesses. Given the benefits, the demand for credit is significant across all sectors and geographies – yet is largely unmet.

Problem: Why do financial institutions [banks and non-banks] struggle to lend?

There are four major challenges limiting financial institutions [fintech, banks, etc.] from lending to MSMEs:

• Limited capital for lending: With the finite capital available for lending, banks, non-banks, and fintech largely lean towards maximizing returns and mitigating excessive risks. Hence, the reasons they lend sparingly.
• Making lending decisions: Financial institutions experience difficulties due to insufficient collateral and/or inaccurate data that inform decisions to lend such as assessing MSMEs' creditworthiness, MSMEs’ sales and transaction data and other due diligence touchpoints.
• Ensuring repayment: Financial institutions also struggle to collect repayments, both in terms of ensuring the correct amount is paid at the right time, and in terms of following up with customers if repayment has been missed
• Disbursing the loan: Getting the appropriate loan to MSMEs and ensuring it is used for business purposes is difficult, with final approvals often given at times that don’t match MSMEs cash flow needs/cycles, and credit disbursed in a way that provides limited ability to ensure that the MSME uses it for income generating purposes — to ensure repayment.