In Silicon Valley, blockchain and crypto startups are so 2022. In Kenya or Zambia or Nepal, they’re innovating to solve real world problems.
Take Kula. The startup was launched by Chris Turner, Samuel Chen and Micah Yeackley in 2023 – the year VC investment in crypto and blockchain companies took a nosedive. The company came on the scene with a mission to funnel capital to clean water, energy access, electric mobility and sustainable agriculture. Its idea: work with local partners to set up projects with clear but decentralized and community-led governance in place. Then “tokenize” the governance of the projects and sell the tokens on crypto platforms to retail investors.
It has raised around than $30 million and signed five projects, including a hydropower project in Nepal’s Tsum Valley and a local agriculture initiative with a mining partner in Zambia. Its latest is a partnership with Enzi Electric Motors to help informal motorcycle taxi drivers adopt electric motorbikes and design financing tools, like accident funds and micro-pensions, to secure their livelihoods.
The approach uses the best of blockchain to solve two problems at once, says Turner, a long-time international development practitioner: moving money to high-impact but underinvested development opportunities, and tracking the flow and use of that funding to ensure it serves the intended purpose and communities.
“I became frustrated with the way the money and impact was measured in the international development sector,” Turner tells ImpactAlpha. “There’s a way to use this technology to audit financials and impact, so you’re able to deeply verify at the grassroots what changes happen – or not.”
Little and local
Born in the aftermath of the 2008 financial crisis, crypto currencies and blockchain platforms more generally were designed with the intention of decentralizing and democratizing finance and data. No one person could have control over any single transaction. And also every part of every transaction would have a clear and immutable data trail.
Anonymity and lack of centralized regulation, however, have made crypto trading platforms a hotbed of criminal activity and fraud, exemplified by high profile cases like the Binance money laundering scandal and the FTX fraud case.
Investment in new applications of the technology has slumped in recent years. This is also in part because blockchain hasn’t delivered on other promising applications for traceability and transparency. A notable example: global shipping giant Maersk partnered with IBM in 2018 to develop TradeLens, blockchain-based inventory management, tracking and shipping-loss log. Maersk’s competitors were reluctant to participate, and the project folded four years after it started.
That example is what inspired Turner and his co-founders to start Kula, however, who saw blockchain’s potential in highly specific, localized contexts – particularly ones involving vulnerable communities. After years assessing large international development projects, he says he had become “frustrated with the way the money and impact was measured” and how little funding trickled down to the communities it was meant to serve.
“There’s always a great set of principles and processes, but local communities and local stakeholders are overlooked, displaced or not involved in project development,” he says. “After many years, I thought there’s got to be a better way.”
Good governance
Kula’s approach is to identify a local partner and set up a local entity for its impact project. It then tokenizes that asset, and tokens are allocated to Kula, its project partners and investors, and also local stakeholders. Token holders get both a governance stake and a share of profits. The tokens are illiquid and can’t be bought or sold on exchanges.
Governance of each project is then managed on blockchain through smart contracts.
Kula, which operates from the Cayman Islands and Mauritius, also has a tradable token that offers a stake in its treasury and underlying assets. Capital raised from the liquid, tradable tokens helps fund the local projects. Retail investors can buy the $KULA token, which trades at just over $0.06.
Kula aims to invest about $2 million to $4 million in each project.
In Zambia, Kula is working with GTD Mining on a sustainable agricultural project in the eastern province of Ukwimi. Limestone harvested by GTD is used to revitalize soil for corn and wheat production on 7,500 acres of tribally-owned land.
“By embedding blockchain-based governance into this agricultural ecosystem, we ensure that decision-making is transparent, resource allocation is fair, and economic benefits are distributed equitably,” Kula writes in a brief on the project. “Local community leadership is at the heart of this transformation. True governance is not imposed from the top down – it is built through participation, stewardship, and shared ownership.”
In Nepal, it’s setting up a hydropower project in the Himalayan region to help Nepal attract data center operators to the region while also meeting the energy needs of local households and businesses.
With its latest project with electric motorbike seller Enzi Electric Motors, Kula made a $2 million equity investment in the company in addition to funding the governance and reporting infrastructure. Embedded in the model is an allocation of governance tokens to motorcycle drivers that uses Enzi’s bikes and battery management system, which is “designed to align riders, staff and investors as the business grows,” the partners wrote in a statement.
Bill Schafer, Enzi’s late founder, had touted the investment for allowing the company “to scale clean mobility in a way that puts riders at the center.”
Kula is helping Enzi with driver data collection to audit how the bikes are used moment to moment and what services drivers need. Because drivers also have a governance say, they’re also taking charge of their own needs: they’ve proposed setting up an accident emergency fund and a micropension scheme.
The proposed funds are still in their proof of concept stage, while Enzi builds financial track records for its drivers. But they present a more transparent alternative to traditional informal savings groups, says Enzi’s Musyoki Muindi. The Kenya Union of Savings and Credit Co-operatives, the umbrella organizations for Kenyan savings and credit organizations, was defrauded of 13 billion Kenyan shillings ($100 million) of individuals’ savings.
With blockchain-based governance, says Muindi, “everybody can see and be involved in management.”
He adds, “Our impact is not just on people riding motorbikes, but on people who live among people using motorbikes.”
Proving the model
To protect everyone’s interests and ensure that projects stay on mission, Kula’s embeds in each project a three-prong governance system between the project’s partner, investors and communities and where no single group can override the other two.
In one trial of the model, a local South African community in a mining initiative used its
governance rights to advocate for pay parity between men and women working in the mines, and also to increase workers’ pay. Both of the community’s proposals passed.
Companies and investors support the structure, and those that don’t often “self-select out,” says Turner. “We haven’t had pushback in the process.”
Note: Kula has raised $30 million, an updated figure from the $17.5 million mentioned on their website.
