In early July I had the pleasure of talking to Thandi, a smart, dynamic woman who operates a small tailoring business in Johannesburg. She envisioned growing, purchasing another sewing machine, perhaps even hiring an assistant. The bank? Forget about it. A mountain of paperwork, requests for collateral she could not supply and interest rates that appeared engineered to ensnare her. Then she heard about DeFi lending. Sounds like a godsend, right? And that’s just what they want you to believe.

DeFi's Promise Empty For Many?

We were sold the narrative that DeFi was democratizing finance, that it was bringing economic opportunity to the unbanked. On paper, it's beautiful. AAVE, Kamino, Morpho, Sky DeFi – these protocols call out seductively on their shiny interfaces, echoing dreams of juicy yields and financial emancipation. The policy implications are that the reality on the ground in Africa is truly much more complex than what many in the West appreciate. It is, to be candid, more perilous.

Think about it. You’re shilling AAVE, an even more “complicated” and “better for experienced users” protocol. How many more Thandi’s in Johannesburg have the technical sophistication to be able to tackle those complexities. How many understand the real risk of liquidation if the value of their collateral – maybe the small amount of crypto they managed to scrape together – plummets?

Through the “shocking truth,” we uncover a grim reality of DeFi adoption in Africa. Rather than empower the vulnerable, it actually takes advantage of them in its current iteration. We're talking about communities with limited digital literacy, often targeted by scams promising quick riches. From rug pulls to flash loan attacks to smart contract vulnerabilities, these dangers are not hypothetical. They are able to erase a family’s life savings in one night! It's like handing a loaded gun to someone who doesn't know how to use it and telling them to go hunting.

Digital Divide Deepens The Risks

The digital divide in Africa isn’t about access to the internet, it’s about access to the internet, that is reliable, affordable internet. It's about the skills gap, the language barriers, and the lack of trust in online systems built by distant developers who often don't understand the local context. You don’t get to take Silicon Valley solutions, drop them into a totally different ecosystem, and hope they grow. It's naive, bordering on reckless.

Need “low fees and fast transactions,” Kamino says, as if they’re available anywhere except on Solana. Great. But then what happens when, like a number of other tokens including SOL itself, the price of SOL crashes? What happens when Thandi's collateral is wiped out because she didn't understand the inherent volatility? Who is going to compensate her? Nobody.

We like to brag on the transparency of DeFi, but transparency is useless if you can’t understand the code. It’s similar to handing someone the engineering schematics for a car engine and then demanding them to repair it without any formal instruction on the subject.

Who Protects The Vulnerable Here?

It’s not the technology, it’s what we don’t do with it responsibly. We’re going to need new, culturally relevant education programs and not just boot-camp-style tutorials. What we really need are local support networks to train residents on how to navigate the complexities and dangers, as well as sidestep the scams. We’re going to have to get regulators to step up and fill that space with a clear framework that protects consumers while fostering innovation.

Sky DeFi, with its “conservative, low-risk approach” might sound like the safer choice. The lack of assets offered and possible transparency issues are a serious red flag. Are we really creating opportunities, or just giving people a marginally better alternative to betting their money away?

Having Pintu Web3 onboard these protocols and bridging them with the app itself is a positive move towards accessibility. Accessibility minus education equals an accelerated path to cataclysm. At the same time, it’s like giving everyone a key to a casino but not educating them to understand risks or gamble responsibly.

Here's the truth: DeFi lending can be a powerful tool for financial inclusion in Africa. We cannot wish these risks away and we can’t ignore their dangers. With a focus on education and by developing targeted solutions, we can begin to address the unique needs of our communities. Otherwise, we’re simply reproducing a different kind of extraction, hidden behind the figleaf of innovation.

Put less emphasis on the technology and more on the public. Would you be surprised to learn that’s the shocking truth you absolutely should know.