Southeast Asia and DeFi’s Big Bet on the unbanked

In one of the more striking early scenes from P.T. Anderson’s 2007 film, There Will Be Blood, there is a gas explosion that destroys the drilling rig set up by oil tycoon Daniel Plainview. Noticing one of his employees observing the situation dejectedly, Plainview rebukes the man, saying: “What are you looking so miserable about? There’s a whole ocean of oil under our feet. No one can get at it except for me!”

Access to and possession of that oil would catapult Plainview, like it did many of his real-world counterparts, to the highest stratosphere of wealth. These days, rather than turning paupers into princes, oil more often serves as a means of transforming princes into the owners of the world’s biggest sports teams. But one can be forgiven for seeing parallels in the mania of that time and today’s focus on what is currently one of the most dynamic aspects of global finance, namely the race to reach the unbanked.

An economic force unrealized

While western countries are rife with banking services that cater to all demographics, in emerging markets the situation is quite the opposite. Southeast Asian economies number among the world’s strongest and yet banking penetration levels in these countries are shockingly low.

A recent report from Bain and Company estimated that around 70 percent of the adult population of Southeast Asia is either unbanked or underbanked. This is a whopping figure, especially considering that the six leading countries of Southeast Asia combine to have a population of around 570 million people and a collective GDP projected to reach $4.7 trillion in the coming years. Reaching these people with adequate services represents an ocean of opportunity, which has triggered a race of sorts to do so.

Ending the reign of cash

Cash is still king in these countries, but how long can the dam hold? In the Southeast Asia region, 50% of people are unbanked, meaning they do not have access to even the most basic banking services, like a savings account. Without a bank account, individuals are unable to receive any banking services including lines of credit.

This is particularly problematic for medium and small-sized businesses, which constitute the majority of businesses in Southeast Asia. The above-mentioned report notes that millions of these kinds of businesses struggle to overcome substantial funding gaps due to the limited options available to them.

Integrating the Southeast Asian demographic into the fabric of global finance has become something of a white whale for today’s leading financial players as well as its would-be Daniel Plainviews. There is a demand that if met would lead to rapid economic development in these countries, the only question is how to do it.

The Bain and Company report deals specifically with the suitability of digital finance platforms as a means of banking penetration. The demographic subset most likely to benefit from the proliferation of digital finance platforms is the underbanked according to the report, while the unbanked are likely to remain on the outside looking in.

DeFi, the king killer

But, there is one sector of digital finance that many believe is currently being overlooked in what it has to offer here. The establishment of above-the-board DeFi lending and borrowing platforms that operate with established stablecoins pegged to Southeast Asian fiat currencies could be decisive in opening the doors for more people to receive adequate banking services and establishing small and medium-sized businesses as a bedrock of the local economy.

Bluejay Finance, a DeFi project that specializes in developing and launching stablecoins for the Southeast Asian economy, has set its sights on using the possibilities inherent in DeFi to usher in a new economic era in the region.

The Bluejay approach to real-world asset lending

Bluejay is revolutionizing real-world asset lending by building a decentralized fixed income protocol called Bluejay Earn. This platform is designed to tackle the credit gap problem in Asia by matching small businesses in need of capital with investors who want to generate consistent returns from real economic activities.

To support this mission, Bluejay has created a stablecoin-powered ecosystem backed by stablecoins pegged to local Southeast Asian currencies. This eliminates the risk of volatility associated with USD-denominated debt, which can be particularly challenging for borrowers in Southeast Asia. By reducing volatility, Bluejay is able to provide reliable stablecoin yields to its users while also earning on swap fees that are redirected to the protocol’s treasury.

Bluejay Earn empowers emerging market economies by providing a platform that is accessible to both investors and borrowers. Investors will have access to opportunities that are typically not available to them, giving them the chance to invest in real economic activity and generate a consistent return while making a positive impact on the world. Borrowers, on the other hand, will be able to raise capital through Bluejay Earn, giving them the resources they need to take their businesses to the next level.

Protocol ideal for tech-savvy, underserved demo

While the Southeast Asian demographic is markedly underserved in the banking sector, it is decidedly tech-literate. This has been proven by the popularity of digital finance applications that have tried to fill the gap left by traditional banking. But these kinds of platforms can only offer a fraction of what a fully-fledged DeFi platform like Bluejay can.

Regarding the project’s vision, Bluejay Finance CEO Sherry Jiang had this to say:

“We’re in a critical moment right now in the DeFi industry where we need to start creating real sustainable use cases. There are enormous opportunities for this within real-world asset lending and payments, especially in Asia where there are massive infrastructure challenges in finance that just aren’t as painfully felt in the west. Large pain points and business opportunities also mean a real yield of 10%+ that can be returned to investors in a way that doesn’t rely on reflexive or “ponzinomic” dynamics. Bluejay Finance wants to be that base stablecoin layer by creating on-chain representations of Asia-based currencies.”

In addition to its potential as a catalyst of economic renewal, there is something to be said for the approach. The Daniel Plainview paradigm of singular, centralized possession and control is no longer adequate. Perhaps nowhere is this more acutely felt than in the out-of-joint world of global finance. That approach has failed Southeast Asia and millions of people around the world. Bluejay and a number of other DeFi projects have set their sights on replacing that with something more balanced and reflective of the needs of those it serves.