The dream of homeownership remains painfully elusive for millions across Sub-Saharan Africa. Inadequate financing options, informal income structures, and a dearth of affordable housing supply have long stymied prospective buyers. However, an ambitious startup born in the region is leveraging blockchain technology to create new pathways to homeownership while chipping away at the continent's housing shortages.

Meet Empowa, a platform harnessing crypto tools like non-fungible tokens (NFTs) and digital tokens to upend traditional real estate financing models. The founders' big bet? That decentralized blockchain solutions can solve challenges long plaguing Africa's housing markets.

"Nearly 80% of income across Africa is informal, leading to fluctuations that make fixed monthly mortgage payments extremely difficult," explained Greg Schneider, who leads operations at Empowa (founded by Glenn Jordan and Phil Lewis). A native of South Africa, Schneider has witnessed firsthand the constraints fueling the housing crisis. "Our innovation empowers people by ditching rigid mortgage structures for more flexible 'rent-to-own' agreements."

At its core, Empowa partners with local developers to facilitate these unconventional rent-to-own home sales to buyers. Instead of requiring prospective homeowners to qualify for traditional mortgages, Empowa enables buyers to pay a minimum monthly rent. Any extra available income can then be contributed toward gradually purchasing the home over time — a model far better suited for Africa's economic realities.

"Mortgages require set monthly incomes to determine affordability, which just doesn't align with how most people get paid here," said Schneider. "With our model, buyers pay each month and build equity at their own pace. It makes homeownership so much more viable."

Chart: Top 10 countries in Africa by number of mortgage providers.
Source: Statista

A multi-layered solution

While Empowa’s concept might seem simple, making rent-to-own agreements a sustainable reality required some innovative blockchain plumbing behind the scenes. Empowa has built a multi-layered crypto ecosystem to facilitate and collateralize every aspect of the process.

It starts with tokenizing all home funding agreements as unique, tradable non-fungible tokens (NFTs). Empowa issues "SDRI" NFTs to institutional investors that contractually entitle them to a share of each home's future income. These liquid NFT assets provide collateral to make investments in Empowa's rent-to-own projects more secure.

The native $EMP token is another key building block. Empowa requires developers to lock up $EMP tokens valued as a percentage of each home's cost into a smart contract escrow. This over-collateralized stake acts as a deposit of sorts, a commitment from developers that provide investors with further downside protection.

If developers lack the capital for this deposit, they can borrow directly from Empowa's community crowd. These retail investors are paid rent as compensation for the borrowed $EMP token financed from a portion of the home's future rental income facilitated via smart contracts.

"Over time, developers aim to reduce their reliance on the crowd's tokens as they accumulate their own $EMP reserves," said Schneider. "But this borrowing system allows us to get projects off the ground faster while letting community members participate in the upside."

The final piece is Empowa Pay — a blockchain-based property management platform integrated into every rent-to-own agreement. The software records all payment activity associated with a home in an immutable, auditable ledger.

"Empowa Pay solves a major pain point by giving developers a seamless system for managing complicated rent-to-own contracts over many years," Schneider noted. "It provides the transparency we need to track each project's performance, mitigate misuse of funds, and keep investors informed."

Together, these interlocking blockchain components make Empowa's innovative housing finance approach more viable and secure for all participants.

"The tokenization, over-collateralization, crowd investment mechanisms, and end-to-end ledger tracking collectively reduce investment risk," Schneider said. "Lowering that risk profile allows us to offer more affordable financing and homeownership options compared to traditional mortgages in our markets."

Chart: Top 20 African countries by number of residential mortgages outstanding
Source: Africa Housing Finance Yearbook 2023

Scaling the continent

Empowa’s early results have been promising. To date, the startup has partnered with over 17 developers to track over $8 million worth of housing projects on Empowa Pay. In Mozambique, where Empowa’s impact has been most felt, the startup claims to offer a 10% mortgage interest rate, compared to 30% in the wider market. This impact is perhaps best captured by one developer's story.

"Our partner Casa Real sold out of properties they previously couldn't sell within 72 hours after introducing Empowa's rent-to-own model," Schneider recalled. "Recognizing that potential, the local government then allocated land for them to develop 25,000 new housing units."

Buoyed by success in Mozambique, Empowa is quickly expanding across other African countries, starting with Kenya, where it is launching its collateral NFTs. Other countries in its pipeline include South Africa, Zimbabwe, Uganda, Kenya, Nigeria, and Morocco. The startup has also inked key partnerships with heavyweight players including EY Parthenon (East Africa) to streamline investments into Kenya's rent-to-own housing projects financed on its platform.

While the vast majority of capital deployed so far has prioritized social impact, Schneider believes Empowa can eventually balance both value drivers as it scales.

"Right now, we're engaging stakeholders across the spectrum — from impact investors to local pension funds looking for new return streams," he explained. "Each has different priorities. But the goal is to ultimately offer sustainable returns that properly compensate investors while still improving lives and enabling developers to meet Africa's skyrocketing housing demand."

Several reports estimate a housing shortfall of over 100 million homes across Africa, a continental crisis that often takes a back seat across administrations. But as is often said: businesses are machines that auto-generate revenue from problems. Solutions like Empowa could bring some relief if adopted at scale.

"In places where traditional financing models have consistently failed, our blockchain-powered approach could be a beacon of hope," Schneider said. "We're just getting started bringing the efficiencies of blockchain to the physical world people live in."