Silta Finance, a new DeFi lending solution, challenges traditional banking sector’s predominance in project finance by announcing a partnership with the Singapore headquartered development company WEnergy Global.
WEnergy Global has agreed to explore cryptocurrency lending solutions to access project finance. The company is partnering with Silta, a new startup connecting DeFi with infrastructure funding. Silta gives DeFi lenders access to a new real asset class, diversifying the investment universe and offering competitive interest rates. With this deal, WEnergy Global will be one of the first borrowers to receive early access to Silta’s new DeFi solution.
Silta facilitates lending for building various kinds of infrastructure assets in a project finance framework. Borrowers can submit loan applications, and Silta conducts a risk analysis and carries out a credit assessment. Based on this information, the Silta community votes on which projects should be financed. Anyone holding crypto can contribute to Silta’s loan pool and receive periodic interest payments.
Besides offering competitive lending rates, Silta aims to significantly speed up the due diligence process. Silta founder, Ben Sheppard, with more than 12 years of experience in the project finance and PPP (public–private partnership) space, comments:
“Silta sells debt to a project developer and takes a fee for selling that debt. The difference to traditional banking is that borrowers do not need to pay fees that may run into millions just for lenders’ transaction advisory services and for the creditworthiness assessment. High transaction costs are the main reason why smaller projects based on new and environmentally friendly technologies are finding it difficult to get funded. Such PPP lite is the sweet spot for Silta because banks cannot easily facilitate debt to these kinds of projects.”
Smaller PPP projects, particularly those in emerging economies, do not always come with contractual step-in rights such as government backed guarantees. Without such additional layers of protection, the risk premium applied by lenders can be excessively high, making the loans unaffordable. This is what Silta aims to change.
WEnergy Global intends to make a funding application in the range of 8-10 million USD through Silta. On previous transactions with its lenders, WEnergy Global has completed and fully paid off its loans within five years with all payments made on time. For its upcoming project portfolio in South East Asia, WEnergy Global and Silta aim for an interest rate in the 5-6% range with a repayment period of 6-8 years.
Silta and WEnergy Global share a strong passion for ESG (Environment, Social, Governance) goals and want to make a material difference in people’s lives. The aim in this first cooperation is to realize an impact investment in a portfolio consisting of clean-powered mini-grids to electrify off-grid communities, similar to the Sabang Project in Palawan in the Philippines, a flagship project developed, co-owned and co-operated by WEnergy Global.
The vision for Silta is to deliver finance in the form of debt to PPP projects below the 100M USD range. There will be a variety of investment products available to lenders. Some of the loan pools will contribute to high-impact projects of the kind that WEnergy Global is working on. Others will aim to satisfy robust ESG criteria with added benefits such as energy-efficient street lighting with the potential to reduce crime rates.
On the future of project finance via DeFi, Atem Ramsundersingh, CEO of WEnergy Global, and former World Bank Group Senior Program Manager, says: “Powering change is about enabling investors across the planet to connect with people and their businesses in remote areas in emerging economies, hopefully in real-time. This will boost sustainable lifestyles and productivity which is so badly needed in creating that better world we all wish to see. Financing will get augmented by decentralised groups of investors who will accelerate the implementation of sustainable development goals.”
A prototype implementation of the Silta solution will become available later this year, allowing partners such as WEnergy Global to experiment with the solution from inception. With an increasing number of borrowers from South East Asia and the MENA Region showing a keen interest in Silta, the aim is to tokenise the first project finance loan by Q2 of 2022.