Is Blockchain the Silver Bullet To Financial Exclusion Crisis?
Conventionally one is prone to associate blockchain exclusively to cryptocurrency, often bypassing the technology’s versatility to solve a wider range of financial problems. Take for example its increasing demand by governments and commercial organizations to resolve the contention of financial exclusion, and the resulting hit the national economy takes for not tapping into a large chunk of a bankable population, especially in rural areas.
The possibilities of blockchain to solve this problem is immense and several software solutions companies have taken the initiative to visit regions struck by this problem to ideate ways to address to take the bull by its horns. Hashcash – a U.S. based software development company – has surveyed the remote regions of Africa’s largest economy, Nigeria, which paradoxically also remains significantly isolated from the rest of the world’s economy. This can be attributed to mainly two reasons – first, Nigeria still depends on buses as a primary means of transferring cash money, an option that makes the asset highly susceptible to being looted enroute to its destination; second, a large percentage of the country’s 150 million population is devoid of bank accounts.
Oddly, even in the absence of easy access to technology, like desktops, and traditional bank branches, there is a wide dominance of mobile phones. This device is all it would take for blockchain based banking to overturn the current economic exclusion crisis on its head.
Instafin – Oradian’s innovative core-banking platform – is a popular choice of microfinance institutions all over Nigeria, and aims at making banking and wealth management accessible to mainly women in the outskirts. One of the advantages that would be seen if the traditional banking model is replaced by one powered by blockchain technology is the use of wallet based micropayment options which would let individuals in inaccessible regions, and those who do not have bank accounts, to transfer money seamlessly from one wallet to another, regardless of any geographic divide.
A blockchain based banking infrastructure is infinitely more secure – a key concern in regions facing political unrest or other civil disruptions. The transparency it provides allows for improved traceability of funds moving across the system, and ensures better accountability of where finances are dispersed – a feature sought after by NGOs that actively participate in uplifting a demography most likely to be excluded from the larger economy.
In recent times, a litany of civil strife has plagued South Asia, Southeast Asia, and some African and Middle eastern nations, affecting people not only at an individual level but also the businesses and enterprises they run, their health care. A survey conducted in 2016 by McKinsey Global Institute revealed 200 million businesses and two billion individuals in emerging economies do not have access to basic banking services such as savings and credit.
In a bid to tackle this crisis the United Nations, in collaboration with governments, civil societies, and fintech companies have drawn up the Sustainable Development Agenda to be achieved by 2030, and this includes financial inclusion of the poor, women, rural societies and businesses.
Since it would be a herculean task requiring tremendous effort and investment to penetrate such regions with traditional financial business models, banks are increasingly adopting digital finance, particularly the immutable public ledger for its many advantages. This includes low operational cost and investment for added infrastructure, circumventing the need for extensive use of cash, traditional bank branches, related paper documents, middlemen and lengthy processing time.
The digital financial services has an immense potential in a market where the primary goal is to enable one and all to participate in the finance industry especially in emerging economies, possibly giving their GDP an enormous boost.
Opting for blockchain powered banking services would have an immediate effect on productivity, investment, support of women’s and marginalized communities’ empowerment, and overall transform the economic prospects of unbanked people in any part of the world.