As a blockchain based decentralized microcredit and credit scoring platform, Colendi differs from other credit scoring institutions that are mostly centralized third-party systems. With the help of many relevant data about users acquired by social media, smartphones and various transactions, Colendi present itself as an alternative platform in blockchain industry to redefine the concept of creditworthiness.
As the main tool of this self-governing, decentralized microcredit system, Colendi token is designed to perform all functions of this platform. Token is an issue that has its own tradable value in the form of not only coins but also points, certificated, in-game items etc. They can be used as units of currencies that have their own rules and terms in exchange of value in order to create transactional economy between buyers and sellers in a self-governing system. As a part of this kind of inherent economy, Colendi token is also designed in the light of the Colendi protocol in an attempt to provide microcredit for undeserved and unbanked people with non-traditional credit scoring and microcredits.
As we have covered before, our protocol is based on three main pillars; a form of identity management, a mechanism for collecting data about users and the means of generating credit score/lending decision based on these data. In order to make these processes more time-efficient, less costly and more reliable, there is a designed external ecosystem based on Erc-725, Erc-735, secure object storage and secure computation environment standards. Click to read more about these standards.
Although quality scoring requires a complex product development processes, we aim to build a simple end product for our community that will work within the traditional demand and supply behavior logic in accordance with the aim of creating easy user experience.
Accordingly, as integral elements of Colendi ecosystem, we can talk about the main actors; who are borrowers, lenders, merchants, data partners, data integrators and validators. These six components of Colendi project is also called as “contributors” or “persona”.
There are two categories of contributors, namely protocol and non-protocol layer contributors. Former represented by four actors who are borrowers, lenders, merchants, data partners contribute to achieve a complete microcredit cycle through Colendi Protocol. They are the native participants of network. On the other hand, the subsequent non-protocol layer contributors, data integrators and validators, play a crucial role in Colendi ecosystem as well as the protocol layer participants.
At this stage, firstly, it is necessary to mention users who are the building block of our protocol as the demand side of Colendi ecosystem. As a person or entity receiving a monetary loan from a lender with the agreement that the loan will be repaid, a borrower immidiately is greeted with lots of opportunities in Colendi ecosystem. Due to the failure of traditional credit scoring mechanism to evaluate people’s eligibility for microcredit; today, most of the global population is fully deprived of banking services according to international organizations’ data. When the failure of underdeveloped credit scoring mechanism to be inclusive for the important part of the society is taken into consideration, Colendi project can be seen as the most powerful alternative in market with its non-traditional credit scoring mechanism that allows potential borrowers to gain access to microcredit at ease.
The credit score of users are shaped by user-owned data, smartphone and social media data, and tertiary data sourced from data partners in ecosystem. In addition to these data segments, Colendi credit history that shows transaction and repayment performance is also a main factor on borrowers’ financial scores. Thus, it is important for borrowers to repay their debts on time in order to keep their credit scores high.
As is also understood from aforementioned information, borrowers are generally individuals and small businesses who need short-term financing opportunities. Besides the advantage of quick capital for borrowers, another incentive for them is the staking mechanism within Colendi. Borrowers may stake tokens in order to vouch for other users and get rewarded by the end of the staking period. Nevertheless, borrowers don’t have to stake tokens, but staking will contribute to active user profile as it would enhance borrowers’ eligibility and credit score when the provided user data would not satisfy minimum supply side requirement demands.
Colendi tokens will not be used as collateral for compensation to the lender in case of a fraudulent behavior by the borrower. Borrowers may rather be asked to present alternative tokens as collateral that will act as a positive variable in the scoring function. The required number of tokens to be staked will be subject to variation depending on the credit score of the borrower. Nevertheless, for individuals that are unable to afford any tokens due to lack of access to any banking services, Colendi will seek partnerships with data-rich non-profit organizations to provide tokens for potential borrowers.
In either case, in the direction of collected data of users, borrower’s eligibility for microcredit is instantly calculated. If result is positive, the user who initiated the purchase at designated merchant by scanning the QR code is prompted to proceed the application for finance and then purchase is completed. The money flows from lender’s wallet to merchant’s wallet, then to the borrower in the form of a product. Later on with a specific timeline, the borrower can pay back to lender through Colendi app.
Accordingly, it can be said that Colendi credit scoring mechanism will enable potential borrowers to access microcredits easily in comparison to the expensive, non-digital and traditional methods.
If you want to be a Colendi Borrower, please join alpha.colendi.com
Colendi Ecosystem Blogs Will Continue with Part 2 and Part 3.