Written By: Unusere Precious

The popularity of the crypto space among both young and old, the allure of tapping screens and earning some "free money," has drawn many into the world of digital currencies.

But what many don’t realize is that beyond trading, there's another system thriving in the crypto economy: crypto lending—a rising method through which people are making profits.

Cryptos are digital assetsowned on decentralized platforms, meaning they can't be easily monitored or controlled. A wide range of people are now invested—from forex traders to casual holders seeking profit. Still, it’s important to note how volatile and unstable the market can be.

Photo credit: Toptal-Google photos.

As Digital Currencies Rise, So Do Lending Platforms

As digital currencies gain traction across Africa, a new wave of fintech platforms has emerged—crypto lending apps promising loans, high returns, and financial inclusion. But are these platforms truly democratizing finance, or creating a new cycle of digital dependency?

These apps operate on blockchains that allow some control and monitoring of user activity, especially concerning loans. Most users are young and tech-curious.

With fintech on the rise in Africa, the appeal of leveraging crypto assets for loans is growing.

But understanding how they work, who uses them, and the risks of decentralized loans—especially in unregulated or under-regulated economies—is crucial to determining whether these platforms are a breakthrough or a bubble.

What Is Crypto Lending?

Crypto lending is a financial service where holders of cryptocurrency lend out their assets to others in exchange for interest payments. Like traditional loans, borrowers repay the principal plus interest over time. The key difference? Crypto lending doesn't rely on fiat currencies.

Crypto Lending Apps: CeFi vs. DeFi

Crypto lending apps are digital platforms—either centralized (CeFi) or decentralized (DeFi)—that allow users to lend or borrow crypto using digital assets as collateral. Here's how they function:

CeFi (Centralized Finance) Models

• Users sign up, complete KYC verification, and deposit their crypto.

• They request loans in local currency (e.g. NGN, ZAR), backed by crypto held by the platform.

• Once the borrower repays with interest, their collateral is released.

Photo credit: Unsplash

Examples:
In South Africa, platforms like Luno, Nexo, and Celsius operate this way. In Nigeria, Bekonta, Koinwa, etc., allow Bitcoin or Ethereum holders to access cash or stablecoins without selling their assets.

DeFi (Decentralized Finance) Models

• All processes occur via smart contracts on the blockchain.

• Users connect wallets directly—no intermediaries.

• Loan terms, interest rates, and liquidation rules are coded in.

• Offers greater transparency and control, but requires strong digital literacy and self-custody skills.

Popular Platforms:
Aave, Compound, and Africa-focused DeFi projects are gaining traction, especially among tech-savvy users.

Who Really Benefits—The Users or the App Creators?

Many assume users benefit more, but that's not entirely true.

On the surface, these platforms look like a win-win. Users get fast credit without traditional banks, and creators build scalable fintech products. But behind the scenes, market volatility and a lack of clear rules create uneven risks.

In countries like Nigeria, where economic instability and policy flip-flops are common, many are understandably skeptical. Yes, there's money in crypto—but there’s also a real risk of losing it all.

While interest rates may look attractive and repayment periods short, many users lack proper education on crypto volatility and loan terms. The risk of liquidation—when crypto values drop and collateral is lost—is poorly understood.

Meanwhile, platform creators often benefit through:

• Listing their own tokens

• Operating liquidity pools

• Earning passive income from transactions

When things go wrong, the risk is offloaded to users. If they default, the app liquidates their assets instantly. If the market crashes, the user—not the app—absorbs the blow.

So it begs the question:
Are these apps empowering tools or just digital loan sharks with sleek branding?

Photo credit: Proshare - Google photos

Financial Inclusion or Exploitation?

These platforms offer a seductive promise: borderless, bankless finance for Africa’s 350 million unbanked adults(World Bank). But are they actually empowering users—or preying on economic vulnerability?

The harsh truth: many users don’t fully understand how DeFi, smart contracts, or token collateral work. Combine that with:

1. Lack of crypto education

2. Volatile token values

3. Predatory loan terms

4. No consumer protection

…and you get a recipe for digital exploitation.

Some platforms hide terms in whitepapers, offer no local-language support, or distract users with bonuses and airdrops. In markets where “the Black man doesn't read” becomes a painfully accurate reflection, many people jump in without understanding the risks. It’s quite true, because many Africans do not fully read these policies.

Others lure users in with airdrops or referral bonuses, encouraging participation before proper understanding

In some cases, economic desperation becomes bait. Much like the digital loan app crisis in Nigeria, some crypto platforms push loans with hidden consequences, preying on urgency.

Regulatory Grey Zones and Risks

Most crypto lending apps in Africa operate in a regulatory grey zone, where traditional financial laws don’t fully apply and enforcement is weak.

No Central Authority, No Safety Net

• Many platforms aren’t registered with national financial regulators.

• They have no obligation to protect user assets.

• They operate across borders, making regulation tricky.

• Some can vanish overnight, especially anonymous DeFi apps.

The Nigeria SEC has warned against unregistered crypto activity, stating that offering crypto financial services without licensing is illegal—though enforcement remains weak.

Photo credit: Trust machine- Google photos.

When Volatility Meets No Regulation

Imagine borrowing $200 in stablecoin using a local token as collateral. If the token’s value drops by 50%, the platform can liquidate your assets with no warning—leaving you broke.

There are no consumer protection laws in most African countries for this. Borrowers are exposed to:

1. Instant asset liquidation

2. High-interest models

3. Opaque loan terms

Governments remain torn between innovation and consumer protection. Until a framework is in place, users are playing a risky game.

Is Crypto Lending a Sustainable Future or Just a Fad?

Africa’s young, mobile-first population makes it fertile ground for crypto adoption. But can crypto lending go the distance?

Startups like:

• Ejara (Cameroon) and

• Kotani Pay (Kenya)

...are experimenting with blockchain credit scoring to offer microloans without banks.

Still, critics raise concerns:

1. Many users borrow not to build but to speculate on tokens.

2. Some platforms lack transparency and education tools.

3. Ponzi-style lending scams(like Cbex, which vanished with trillions of naira) continue to damage trust.

   The Balancing Act: Innovation vs. Infrastructure

The long-term success of crypto lending in Africa hinges on:

1. Robust regulation that doesn’t kill innovation

2. Mass education to help users understand risks

3. Stablecoin integration to reduce volatility

Africa is still writing the rulebook—but the direction it takes will determine whether this remains a solution or a trap.

Conclusion: Hype or Help?

Crypto lending in Africa stands at a crossroads.

On one side, it offers financial empowerment—inclusive credit systems and new paths to wealth. On the other, it’s a risky space filled with technical jargon, unregulated danger, and potential exploitation.

Whether crypto lending becomes a game-changer or another bubble depends on how fast developers, governments, and users close the gap between education, innovation, and regulation.

Until then, it remains both a promise and a peril—a tool that could build freedom or deepen financial traps.

Written By: Unusere Precious