SI Pools
SI Pools are decentralized climate funds connecting impact investors with borrowers.
With SI Pools, impact investors can invest in social impact projects faster and more flexibly, while receiving better overall returns than in the traditional market. Through SI Pools, impact investors are able to clearly see and track how much social impact their investments have created.
SI Pools are decentralized protocols that deposit stablecoins in DeFi protocols as well as in tokenized loans to fund real-world projects with social impact (e.g., Solar PV Projects in emerging markets).
This section explains the internals of SI Pools. If you are mostly interested in understanding the general core features of SI Pools, please click here.
How it works
Below, we walk through the process of depositing and withdrawing with Sunny Pool, Social Impact Network's first SI Pool.
Impact investors deposit stablecoins in Sunny Pool and receive Sunny Tokens. Sunny Tokens are pool tokens and represent all investor assets (liquidity reserve + tokenized loans) within the pool.
Impact Investors may deposit Sunny Tokens in SI Vault and receive additional yields.
Liquidity that is not used for social impact projects flows into the Liquidity Reserve and generates yields through 3rd-party DeFI lending protocols. Impact investors can withdraw their pool token (SUNNY) based on the given token valuation. They receive payouts from liquid assets. Investors can trade their pool tokens on the secondary market at any time.
All social impact projects within Sunny Pool are solar PV projects. In Sunny Pool, borrowers are solar PV operators who take out loans from Sunny Pool in order to implement solar PV systems at offtakers. All project proposals are proposed by whitelisted impact partners like UNDP. SI Governance decides which projects will be funded.
Project proposals that have been selected to be funded receive funding through stablecoins of the given pool. The pool receives a loan token for funding a project. The borrower is responsible for the execution of the proposed project and the fulfillment of loan installments.
Offtakers receive the energy generated. With Sunny Pool, the impact validation ensures that the described CO2 reduction and clean energy generation is measured and published in the SI Network. Impact validation may be performed in an automatized manner.
Installment payments are made from the borrower to the pool.
Liquidity Reserve
Each SI Pool has a Liquidity Reserve which is used to cover withdrawals. The Liquidity Reserve is deposited in 3rd-party DeFi protocols (e.g. 4Belt). In the event that the Liquidity Reserve is unable to fulfill requests, token holders can trade their shares on the secondary market.
Future versions of SI pools will allow loan tokens to be withdrawn when the liquidity reserve is empty.
Project Selection and Acceptance
SI Pools are managed by SI Network. Proposed projects and borrowers may be rejected. Based on SI Governance, the following stakeholders decide on project acceptance:
Through SI Governance, token holders have the capability to reject or approve proposed projects.
Whitelisted impact partners (e.g. UNDP) are able to propose projects. While in Phase Init, the SI Team onboards impact partners who propose eligible projects. In later stages of SI Network, these processes will be executed through SI DAO.
Review the full Project Approval Process to understand how projects are selected and accepted through SI Governance.
Project Implementation and Loan Contract
Project implementation may start once project proposals are approved by SI Governance.
Borrowers are required to sign loan agreements before performing the funding. Afterward, the requested funding amount will be deposited from SI Pool to the tokenized loan. In return, SI Pool receives loan tokens that represent the right to the principal and interest. Borrowers can withdraw the funding amount in stablecoins and will carry out the project implementation. Borrowers are legally obligated to implement the projects as described in the project proposal. The implementations may be supervised by impact partners.
Default Risk Mitigation and Insurance
Borrowers are legally obligated to fulfill all installment payments on time. To minimize the default risk, only borrowers with a proven long-term track record of project implementation are proposed to SI Governance. Impact partners like development agencies select eligible projects and due diligence will be conducted.
The SI Team, acting as a delegate, conducts a risk assessment for each project it is voting on. The risk assessment is created by external experts and provides a default risk rating (0% - 100%) for each project. The risk assessment and risk rating are published on the corresponding project page and can help to make an informed voting decision.
Additionally, SI Governance acts as an insurance system to cover eventually occurring losses. Each user who actively participates in the project selection of SI Pools receives SI Token as a reward, but at the same time has to risk a portion of his SI Tokens for project selection. In case of default, tokens put at risk may be used for compensation payments.
In case of default, no further SI Rewards are paid (see SI Rewards for Borrowing, Onboarding and Voting), neither to the borrower nor to the partner organization or voters who have voted on the project. At the same time, the borrower suffers severe reputational damage, as all data on the default are publicly available.
In any case, legal action can be taken against the borrower if they fail to return loan principals and interests within the specified term. At launch, Social Impact Network Ltd will be responsible for pursuing legal recourse if a borrower defaults.
SI Rewards for Borrowing, Onboarding and Voting
While SI Pool impact investors receive SI Token as a reward through SI Vaults (Sunny Vault), borrowers, impact partners, and voters within SI Governance receive SI Rewards in form of SI Token for each active project they are implementing, have been onboarding, or voting on. The rewards are distributed only to borrowers, impact partners, and voters of active and not-defaulted projects. SI Rewards are expected to be distributed until at least early 2025.
Total Amount of SI Rewards
A total of 5% of all SI Tokens are paid out as rewards for borrowers, impact partners, and active voters of SI Governance. Rewards are paid out on a monthly basis.
Distribution of SI Rewards (Allocation Formula)
SI Rewards are distributed on the 6th calendar day of each month. Rewards are distributed to the borrower, the onboarding impact partner, and all voters of an active project. From the monthly distributed SI Rewards, 10% is reserved for Founding Members. If there is no Founding Member active, this portion will be distributed to the remaining members, according to the existing distribution formula. If a borrower defaults on payment by more than five days, the borrower, onboarding partner, and voters will not receive SI Rewards on that project for the following three months.
The monthly reward amount issued to the onboarding impact partners, borrowers, and voters depends on the total amount of the loan repayments. For project A with impact partner pt, borrower br, and voter vt, the following rewards in form of SI Token will be provided
This type of distribution gives borrowers, onboarding impact partners, and voters an incentive to vote on and implement short-term projects with high funding amounts that do not exceed five days overdue.
In future versions, the generated impact will also be taken into account when calculating SI Rewards.
Example 1)
There will be an SIT reward disbursement in the amount of 100.000 SIT. Of this, 10.000 SIT are allocated for Founding Members. A total of four borrowers and two onboarding impact partners are active. A total of $10,000 in reimbursements was made by all active borrowers. Of this $10,000, $2,000 was reimbursed by active Project A. Thus, the rewards for Project A for this month are calculated as follows:
Therefore, 18.000 SIT will be split between the borrower, the impact partner, and voters of project A. Of this 18.000 SIT, 6.000 SIT are sent to borrowers and 6.000 SIT to the partner.
SIT Token holders with a total of 100.000 staked SIT have been voting on the project. The project has been accepted with 70.000 SIT votes for and 30.000 votes against the project. Therefore, for each staked SIT voting on the project proposal of the project, 0.06 SIT (6.000/100.000 SIT) will be distributed.
Founding Member Distribution
A total of 10% of the monthly distributions are reserved for Founding Members and divided equally among all Founding Members. If no Founding Member is active at the current distribution, this 10% will flow into subsequent SIT distributions.
Example 1)
There is a distribution of 100.000 SIT. Within the pools, there are 12 active borrowers and three active onboarding impact partners. Of the 12 borrowers, three are Founding Members and of the onboarding partners, one is a Founding Member.
90.000 SIT will be distributed according to the allocation formula. 10.000 SIT will be divided equally among the four impact partners so that each Founding Member will receive an additional 2.500 SIT.
Example 2)
There is a distribution of 100,000 SIT. Within the pools, there are 12 active borrowers and 3 active onboarding partners. None of them is a Founding Member.
100.000 SIT will be distributed according to the allocation formula.
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