San Francisco-based Divine Research has initiated the issuance of approximately 30,000 unsecured short-term crypto loans since December 2024, leveraging World ID’s biometric verification system.
Overview of the Lending Model
The company offers loans under $1,000 in USDC stablecoin at interest rates ranging from 20% to 30% annually. Borrowers include high school teachers, fruit vendors, and individuals lacking access to traditional banking services. Founder Diego Estevez noted that the reported first-loan default rate stands at approximately 40%.
Impact on Credit Access in Emerging Markets
Divine Research’s lending model targets a significant global population facing obstacles to accessing traditional credit services. The World ID system enables biometric verification of borrowers without the need for government identification documents or credit histories required by conventional lenders.
Traditional Financial Institutions Entering Crypto Lending
While Divine Research focuses on unsecured small loans for underbanked customers, major financial institutions like JPMorgan are exploring asset-backed lending, highlighting diverse applications of cryptocurrency within credit markets. This institutional backing also indicates a resurgence in interest for digital credit products following the market downturn in 2022.
The unsecured lending model introduced by Divine Research provides a unique solution to the credit access challenges in certain regions, while traditional banks are exploring secured lending options. This contrast may define the future development of technology in cryptocurrency finance.
