MIP6 Application: Cauris Global Fintech Fund

This MIP6 Proposal will finance a special purpose vehicle (“SPV” or the “Issuer”) established by Cauris Investment Management (“CIM” or “Manager”) for the purpose of providing debt financing to Financial Technology companies (“Fintechs”) in international markets. Cauris will use the Centrifuge platform to raise funding.

Summary

  • Cauris Global Fintech LLC (“SPV” or the “issuer”) is a fintech focused vehicle setup by Cauris Investment Management (“Manager”), a debt focused investment manager.
  • Issuer will be set up to provide debt financing to Fintechs in Asia, Africa, and Europe. Issuer target fintechs provide loans to consumers and SMEs. The loans offered by these fintechs vary from consumer loans, payday/invoice advances and supply chain financing. They tend to be very short in nature (60- 90 days)
  • Issuer is looking to raise funding from Tinlake investors including Maker by issuing TIN and DROP tokens.
  • CIM has developed a very rigorous risk management framework to protect investors investing in Issuer:
    • Strong underwriting of each fintech loan underwriting, collection policies and loan performance
    • Loan level level protection in terms of advance rate and collateral
    • Diversification in terms of assets originators, asset classes and geography
    • Junior tranche subordination (20-25% of pool size) providing first level loss protection
    • Bankruptcy remote vehicle ring fencing assets; increased enforcement with appointment of an independent director
    • “Skin in the game”, CIM will invest in a significant amount of the TIN tranche to show confidence in the pool
    • Transparency: Cauris DeepDive, our proprietary software, enables investors to monitor the portfolio performance and the pool level protection triggers on-chain and via web browser

1. Who is the interested party for this collateral application?

The Issuer, Cauris Global Fintech LLC, a fintech focused vehicle setup by Cauris Investment Management (“Manager”) is represented by Azer Songnaba, CFA ([email protected]) and Alex Liege ([email protected]) (see biographies below).

The Issuer will source, underwrite and manage fintech debt investments. It will create and own non-fungible tokens (“NFTs”) representing each fintech asset in the pool. It will lock its NFTs into the Tinlake protocol to serve as collateral and offer ERC-20 tokens to investors, specifically DROP Tokens & TIN Tokens.

Cauris IM will also set up and manage Cauris Debt Venture (“Debt Venture Fund”) which will buy TIN tokens offered by the Issuer, to show its confidence in the performance of the pool and to generate returns for investors.

The general partners of Cauris IM have extensive experience in fintech’s underwriting & operations, capital market & securitization, blockchain technology and engineering applications.

2. Provide a brief high-level overview of the project, with a focus on the applying collateral token.

Cauris IM, the Manager, will source, underwrite and originate loans to fintech for the benefit of the Issuer, and will leverage the Centrifuge platform to provide high quality real world assets to MakerDao in exchange for liquidity.

2.1. Collateral/ Assets Description

Cauris is a mission driven company that applies advanced technology to solve financial issues while providing high risk adjusted returns to its investors.

We aim to give 100 million more people access to capital. We believe that access to credit is key to empowering individuals and enabling economic growth.

According to the World Bank, to close the gap on financial inclusion and enable the gig economy, medium & small enterprises need $5.2TN in financing. Traditional banks unfortunately have been unable to fulfil this gap as illustrated by the fact that only 25% of Africa’s population has a bank account vs. 90% in OECD countries.

As shown above, there is clearly a need to disrupt the traditional banking system to make financial inclusion around the globe a reality.

At Cauris, we believe that fintech is the fastest way to efficiently connect millions to financial services, and that DeFi provides a unique opportunity to democratize and lower the cost of financing.

Driven by this mission, we are finding the best-in class fintechs operating in international markets which are providing working capital and access to financing to consumers and SMEs.

We use a combination of strong underwriting and legal protections to secure our debt investments in fintechs.

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2.2. Pool Structure

  • Cauris IM has structured the pool to contain 20-25% of a TIN portion representing the first loss piece, thus providing substantial protection to the DROP
  • The pool will be diversified, consisting of at least 10 fintechs operating across multiple asset classes and geographies, thus providing uncorrelated risk profile
    • The diversification will be enforced via concentration limits
  • There will be continuous monitoring of the individual fintechs portfolio performance and non compliant assets will be removed from the pool

2.3 Pool Protections

Our pools will benefit from multiple layers of protections:

  • Asset level underwriting
    • Evaluation of fintech strategy
    • Due diligence of operations (underwriting, disbursement and collection policies) & management team
    • Historical portfolio & financial Analysis
  • Structural Protections
    • Perfected security interest in assets of fintechs
    • Robust collateral coverage covenants
    • Bankruptcy remoteness of issuer, with independent director
    • Investment diversification across geographies and types
    • 20 to 25% TIN buffer
  • Analytics
    • Peer set analytics to inform underwriting decisions
    • Dynamic monitoring of compliance with covenants
    • Predictive analysis to anticipate losses
  • On-chain transparency
    • Full visibility into borrower asset performance
    • On-chain decisioning of future financing

3. Provide a brief history of the project.

3.1 Cauris overview

Cauris IM is a fintech focused investment manager that aims to promote financial inclusion in the world by providing access to capital to millions of people globally through fintech partners. The Cauris team is composed of:

Alex Liege / CEO

  • Previously head of product and credit at Juvo (consumer lending)
  • Product roles at Mastercard, YP (sold to Visa), MTN mobile money (valued at $5BN)

Azer Songnaba, CFA / Chief Investment Officer

  • $10B+ of structured finance transactions & corporate lending at Goldman Sachs
  • Credit risk and underwriting of fintechs and banks at Mastercard

Charles Packer / Chief Technology Officer

  • Previously head of engineering at Juvo and Gaia
  • Decades of experience leading engineering teams

Ramesh Dhanaraj / Legal Counsel

  • Early stage equity investments and private credit at Fortress Investment Group
  • Financial services lawyer at Sidley Austin and Blank Rome

3.2 Target investments

Cauris identifies market leading fintechs across international markets with proven leadership teams that are actively seeking to provide much needed capital to consumers and SMEs to spur economic growth. Our combined decades of fintech and credit experience enables us to source, underwrite and structure sound debt investments.

Case Study: Branch India

Overview: Branch is a fintech founded in 2015 which offers unsecured loans to consumers in Kenya, Nigeria, Tanzania, and India. Since its creation, Branch has originated over $500M in loans to over 4 millions borrowers. Branch raised $270M in debt and equity from reputable investors including Andreessen Horowitz, Visa and the World Bank. Branch leadership team founded Kiva.org 15 years ago- a non-profit which has raised +$1 billion for microfinance companies in 70 countries.

Use Case: To enable Branch expansion into India, Cauris and Davoa Capital have extended a $10M facility leveraging the Centrifuge platform. This facility enables Branch to secure long term financing to serve 300.000 new customers who would otherwise lack access to financing.

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4. Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated

Centrifuge’s mainnet deployment will be accessible via tinlake.centrifuge.io

Technical documentation about Tinlake can be found here: GitHub - centrifuge/tinlake: bringing individual, non-fungible assets to DeFi

Maker specific implementation here: https://github.com/centrifuge/tinlake-maker-lib 1 1

5. Link any available audits of the project. Both procedural and smart contract focused audits.

Centrifuge has conducted several audits of its technology stack. The audits can be found here: https://github.com/centrifuge/security/tree/master/audits 2 1

6. Link to any active communities relating to your project.

7. How is the applying collateral type currently used?

Cauris has launched one-borrower pool (Branch Series 3) to date on Centrifuge. Details of the pool can be found here and in the preceding section 3.2

8. Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?

Cauris has incorporated Wari Series LLC, a Delaware (USA) limited liability company (the special purpose vehicle, “SPV”). This SPV has been formed to finance fintech debt.

This SPV structure creates a bankruptcy-remote entity whereby owners, debt holders or interested parties of this newly created SPV are left unaffected by Cauris financial, operational and/or legal health. Cauris will appoint an independent director in the board of the SPV to provide oversight and enable a smooth transition in an event of default

9. Where does exchange for the asset occur?

The SPV enters into a subscription agreement with investors who are receiving DROP from the SPV in turn for providing DAI. The DROP token can be redeemed against the cash flows of the underlying collateral directly from the SPV by any DROP holder. This is ensured by the Tinlake smart contracts and the primary way for interacting with these tokens.

10. (Optional) Has your project obtained any legal opinions or memoranda regarding the regulatory standing of the token or an explanation of the same from the perspective of any jurisdiction? If so, those materials should be provided for community review.

The issuance of DROP and TIN tokens is handled via Tinlake Blockchain protocol, with applicable AML/KYC procedures and compliance with US securities guidelines.

Cauris has received a legal opinion from its counsel, Clifford Chance, confirming that the proposed transaction and structure is compliant with applicable laws and regulations.

11. (Optional) Describe whether there are any regulatory registrations for the token and provide related documentation (including an explanation of any past or existing interactions with any regulatory authorities, regardless of jurisdiction), if applicable.

Not applicable

12. (Optional) List any possible oracle data sources for the proposed Collateral type.

The Issuer will provide daily NAV updates for each underlying fintech debt, which will be used to value the NFTs.

If an updated NAV submitted by the Issuer shows a decrease in the total expected value of an underlying fintech debt, then the value of the NFT will be marked down. If, as a result of such mark down, the outstanding value of the DROP Tokens increases to more than 75 to 80% of the Pool Valuation, then Tinlake will lock the Issuer from drawing any further Dai and will lock the TIN investors from redeeming. The Issuer may restore balance and unlock Tinlake by: (1) buying additional TIN tokens so that the proceeds will increase the cash reserve in an amount necessary to cause the value of outstanding DROP Tokens to be no more than 75 to 80% of the Pool Valuation or (ii) redeem DROP Tokens in an amount necessary to restore the value of outstanding DROP Tokens to no more than 75 to 80% of the Pool Valuation

13. (Optional) List any parties interested in taking part in liquidations for the proposed Collateral type.

Default of a fintech borrower: In the event a borrower defaults on their loan, Cauris will seek to exercise its security in the borrower assets that include all assets of the borrowers including their receivables book (125 to 133% the value of the debt) and any other assets of the borrower. Our ownership of these assets are perfected via legal filings. Our legal representative in the jurisdiction of the borrower will guide us through the liquidation process.

Default of Cauris IM: All assets financed through this pool are held in a bankruptcy remote vehicle (SPV) and ring fenced from any insolvency proceedings relating to Cauris IM. In the event of default of Cauris IM, the Independent director will take over day to day operations of the SPV

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