Haraka and Mento Labs: Empowering Businesses in Emerging Markets Through Microcredit in Local Currency Stablecoins

Millions of small entrepreneurs in emerging markets struggle accessing affordable credit, as they often lack the formal credit histories required by traditional banks. This leaves them dependent on informal lending groups with limited capital. These challenges are part of a global credit gap of $4.9 trillion and affects 2.5 billion people who lack formal financial services.Traditional microfinance methods, with their high interest rates and strict requirements, only add to the problem.

Recognizing these challenges, Haraka introduces an innovative lending platform that leverages social reputation as a cornerstone of its credit underwriting process. In partnership with Mento Labs, Haraka combines a social reputation system with local currency stablecoins to empower entrepreneurs to access affordable microloans and build robust credit profiles.

About Haraka

Haraka is a decentralized protocol that connects global capital to last-mile entrepreneurs in emerging markets. Entrepreneurs can request loans in local currency stablecoins, build their credit profiles, and link financial and social data to establish a robust credit history.

Through its innovative platform, Haraka ensures transparency, efficiency, and security for both borrowers and liquidity providers. By sourcing liquidity from global crypto investors and institutions, Haraka delivers microloans to underserved communities, enabling them to scale their businesses and achieve long-term growth. Haraka is the first microcredit protocol to issue loans in local currency stablecoins.

Haraka’s Solutions

Haraka’s solution is built on three core innovations:

Self-Sovereign Credit Profiles: Entrepreneurs can build their credit profiles based on a mix of on-chain and off-chain data, including social attestations and financial transactions. This empowers borrowers to take ownership of their financial reputation and unlock access to microcredit and other financial services.

Microcredit Protocol: Haraka’s protocol streamlines lending by combining borrower dApps, liquidity pools, and real-time performance dashboards. Borrowers can request loans, link social accounts, and track their credit scores, while liquidity providers monitor their portfolio’s performance and returns.

Local Currency Stablecoin Integration: Haraka uses local currency stablecoins as the core currency for its lending system. Borrowers can receive loans in decentralized local currency stablecoins like Mento’s cKES (Kenya Shilling stablecoin), reducing friction in transactions and ensuring trust throughout the process. These stablecoins can be off-ramped into local currencies through mobile money solutions. Haraka offers APRs (Annual Percentage Rate) as low as 9.48%, significantly lower than the 44% typically charged by traditional microfinance institutions. Local currency stablecoins enable low transaction costs – less than $0.10 per transfer.

Haraka’s Partnership with Mento Labs

Mento local currency stablecoins are the core currency used by Haraka users to access loans.

Traditional global stablecoins like USDt or USDC are not always suitable for borrowers in emerging markets, as they introduce currency conversion risks and complexity. By using Mento’s local currency stablecoins—such as cKES and the Ghanaian Cedi stablecoin—Haraka delivers an easy and familiar user experience while protecting borrowers from FX volatility.

The use of Mento local currency stablecoins are crucial in abstracting the complexity of blockchain technology, enhancing user-friendliness and lowering barriers to entry for borrowers. Compared to global stablecoins, cKES offers a familiar tool that makes the technology understandable for users new to cryptocurrency.

cKES Microcredit Pilot Program in Kenya

Launched in May 2024, Haraka’s micro-loan pilot in Kenya exemplifies the impact of their innovative approach. In collaboration with Mento Labs, Clixpesa, and Kotani Pay, Haraka disbursed over 1 million cKES to 150 micro-entrepreneurs across 20 lending groups, 85% of whom are women. The pilot leveraged community-based credit insights, social reputation, and decentralized tools to provide affordable and transparent financial services.

This pilot integrates creditworthiness with community insights and peer feedback, allowing Haraka to use social reputation as part of its loan approval process. It also introduces the use of cKES, which brings key benefits:

• Borrowers can use a familiar currency, simplifying onboarding for remote users and boosting local economic participation.
• Transactions are recorded on-chain, ensuring transparency for lenders, reducing overhead, and lowering borrowing costs.
• Since cKES is tied to the Kenya Shilling, borrowers avoid risks from foreign exchange fluctuations, unlike USD-pegged stablecoins, providing stability for repayments and financial planning.

Remarkably, 99% of the borrowers in this pilot never used cryptocurrency before, highlighting the effectiveness of using digital currency that resonates with users’ existing financial habits.

Partner Testimonials

“Mento’s local stablecoins empower Haraka to offer Web3-driven financial inclusion. By integrating local currency stablecoins into our protocol, we can deliver affordable, transparent credit solutions that resonate with our users' everyday experiences,” said Jessica Gaubert, COO at Haraka

“We are proud to partner with Haraka! The success of initiatives like the cKES microcredit pilot in Kenya underscores the potential of combining decentralized tools with localized solutions to drive meaningful economic impact. By using Mento local currency stablecoins as the core currency for microloans, Haraka has demonstrated how blockchain technology can integrate into familiar financial practices, reducing barriers and empowering users,” said Markus Franke, CEO at Mento Labs.

Moving Forward

Recently, Haraka expanded its decentralized credit system in Ghana to support over 3,000 micro-entrepreneurs with local stablecoins in partnership with the Grameen Foundation and Mercy Corps Ventures. The platform will integrate more on-chain and off-chain data to strengthen borrowers' credit histories and unlock greater financial opportunities.

Haraka also aims to onboard more entrepreneurs, build robust credit infrastructure, and continue offering affordable, transparent credit solutions.

For more information on Haraka, head on over to their Twitter / X, LinkedIn and Medium.

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