Importance of Financial Inclusion using Blockchain
Blockchain is killing it!
From helping startups raise money to making processes such as voting and food traceability faster and more transparent than ever before, Blockchain is making the “make-the-world-a-better-place” task seem easier than ever.
Here’s our 2 bits on Why 2018 belongs to Blockchain?
In this blog, we are going to put some light on How financial inclusion can be achieved using Blockchain by Blockchain.
With almost 2 billion adults not having access to reliable and affordable financial and banking services, Financial Inclusion still remains at the top of the To-Do list of governments and organizations like that of World Economic Forum.
The world is more connected than ever before, doing business with people and entities from across the world has been made possible with the advancements in technologies over the last few decades.
Yet, an alarming majority of people operating small and medium businesses do not have access to banking and financial services, which makes them vulnerable to the ineffective, inefficient, unreliable, risky and expensive options such as pawnbrokers, mortgage loans, or even cash-under-the-mattress.
What can Financial Inclusion bring about?
Before we explain how financial inclusion can be achieved using Blockchain, let’s explain why Financial Inclusion is so important for the world economy.
The affordable access to banking and financial services will help the poor step out of poverty as they get the much-needed aids such as Insurance, Affordable Credit facilities and what not. This would instill the all-important self-reliance and confidence in the people from rural areas to invest and venture without the heavy and unfair charges that they are otherwise vulnerable to.
Over 200 million SMEs still remain underserved as they don’t have access to the financial institutions and what come with it. These business owners will no longer be dependent upon the unorganized sector for their financial needs.
Not only will it be beneficial for these businesses and the people, Financial Inclusion leads to a more stable ecosystem for the banks and financial institutions too. But, How? You must be wondering.
Banking the Un-Banked
As the people in rural and urban areas get access to the banks and financial services, the tendency to save is increased among the people. Now, where are they going to deposit all that money? The Banks.
This gives the banks a huge customer base which is using their services and paying for the same. Oh, and the big funds they deposit with these banks, that’s the deal. This solves the problem of dependence over the volatile and unstable market funding so we don’t have to live through yet another 2008 crash.
Now that you’ve understood why financial inclusion is crucial for the world economy. Let us tell you how Financial Inclusion can be achieved using Blockchain.
Digital Identities for Financial Inclusion
It is no news that the Blockchain is capable of eliminating intermediaries and creating the data more secure and accessible than the conventional technologies. These are the attributes which make it the frontrunner in this disruptive world.
As the main motive of Financial Inclusion is making banking and financial services available to the poor, helpless and unaware people which includes the farmers in rural areas, refugees and the small business owners across the world, the first step would be to give these people an identity.
Although, these people are almost a billion in number. It’s not a small number, is it?
And while the governments and even the most competent of organizations across the world are struggling with the current data, we can’t expect them to be able to handle a billion more identities. Especially when it’s refugees and people from rural areas we are talking about, let alone the people who already have some level of identity in their database.
That’s where Blockchain enters!
The biggest challenge at this point of time in front of organizations with FINANCIAL INCLUSION their battle-cry is that these unbanked people do not have any access to the banks or have no identity whatsoever, which makes it difficult than impossible for them to open an account in the first place.
Creating their identities over the internet will be the first step towards it.
Yes, Providing the Un-Banked with formal identification documents using blockchain to help them access the basic banking services
Various fundamental issues such as that of mismatch in digital entities, letting people create and identify their identities over the open-source network can be resolved in a much reliable and robust manner.
To help you understand better how Blockchain is resolving the issues of unidentified people, Here are some of the related projects:
- Accenture Plc and Microsoft Corp teamed up to create an ID network with Blockchain Technology as part of a United Nations-supported project to provide legal identification to 1.1 billion people worldwide with no official documents.
- IBM has been working on projects related to Digital Identities with Blockchain Technology.
- Finland made it possible for refugees to be a part of the banking system.
Now, the people have their identities over the network, have a bank account or two maybe. What comes after? The banking services must be on-point. Right? Blockchain does it, too!
Transparent and Un-Hackable Architecture by Blockchain.
Being just able to help with the Digital Identities is not the sole reason why people think that achieving financial inclusion with Blockchain is possible, is it?
The very attributes which have made Blockchain the messiah it is, Transparency and Un-hackability will even help to make the banking systems and architecture better.
As the Blockchain acts as a Decentralized and Distributed ledger system, it is almost impossible for any fringe elements to hack the system. This, in turn, instills a sense of Confidence and trust in the minds of people to abandon the conventional methods for managing their money.
Low-cost Transactions and Convenient International Payments
The blockchain is already regarded as the technology which can allow peer-to-peer transfer of assets over the Internet in real-time.
It can be leveraged to build platforms which will facilitate fund transfers at more affordable and faster rate than the traditional methods. As the smartphones are getting to even the most remote areas of the world, various digital payments applications can be used to make transactions easier and affordable as the number of parties involved is lesser.
The open-source, real-time, reliable, robust networks which can be developed using Blockchain will be instrumental for the banks to reduce the cost of processing payments, national as well as international.
With Banks, governments and other related institutions working collaboratively on all the above fronts, Financial Inclusion can be achieved using Blockchain effectively and efficiently.
This was all, on How Financial Inclusion can be achieved using Blockchain.
Oh, Wait! We never told you about our Blockchain Capabilities
Sodio provides a complete range of development and consulting services in projects based on Blockchain Technology. These include feasibility studies, business case assessments, operating model design, advisory services on systems architecture and full-scale systems integration.
With a team of 20+ Blockchain developers proficient in Blockchain Technology, Sodio can deliver great products.
Have a look at our latest project where we developed a Cryptocurrency Exchange Platform, ibexcm.