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How Blockchain offers to bring economic inclusionBy Abhishek Singh | May 30, 2018, 8:58 a.m. GMT
Blockchain promises to revamp economic inclusion in hereto unseen manner. It promises to justify the very word “inclusion” by reaching one and all in every corner of human civilization.
Currently, over one-third of world’s population, approximately 2 billion people, in the world don’t have access to the formal financial world in any form. What is even more concerning is the fact that ~73% of the world’s population is unbanked. There are over 200 Million illegal or undocumented immigrants/citizens in different countries of the world. Due to lack of documentation, these undocumented people continue to be victimized and be taken advantage of by the informal and formal financial systems.
What comes to rescue then is deep penetration of mobile phones in these countries. Of the unbanked population of the world, ~60% have access to Mobile phone and/or internet. For example, in Sub-Saharan Africa, of the 350 million unbanked adults, 155 million own a mobile phone. In India, out of total population of 1.25 Billion people, over 1 Billion already have access to mobile phones. Mobile phones and connectivity they offer hence have the potential to be leveraged by Blockchain technology to provide financial inclusion.
Few ways in which Blockchain can provide financial inclusion are mentioned below:
1. Digital identity for citizens
Absence of digital identity is the single most prominent reason for not being able to get included in financial channels. Creation of digital identity for poor citizens who mostly lack any documentation will lead to a higher financial inclusion. Such identities can be, for example, based in India adopted biometrics to create unique digital identity for over 98% of the population. This identity when based on Blockchain becomes more secure and widely usable. Citizens with Digital identities will have higher access to the financial system, would gain a higher independence and have substantially better chances for welfare
The solution can be built with the purpose of integration with external systems in order to diminish the fraud and error possibilities in the delivery of benefits for the financially excluded. Some of the key start-ups empowering this are OneName, ShoCard and BitNation.
2. Economic Identity Creation of Blockchain-powered
Along with digital identity, another problem for the financial institution in banking with unbanked is the credit scoring of the potential client. Along with digital identity what else is required is economic identity. Blockchain can supply this very easily as all financial transactions of the person will have on this Blockchain itself. For example, BanQu is an Economic Identity technology platform for the creation of a personal digital profile comprised of various records of personal, financial and other activities. The economic profile created by BanQu has attained acceptance by government and financial institutions wisely.
3. Blockchain-powered remittance service
Since transactions can go on Blockchain peer-to-peer across the globe instantaneously on a trusted public ledger, in a verified way, Blockchain. An example of Blockchain-powered remittance service is Stellar, the Stripe-backed open-source payment network. Another example is, Oradian, a cloud-based software provider for microfinance institutions in developing countries. The payment-transfer network inside Oradian is built on top of Stellar’s platform. Oradian is being used by 300000 Nigerians. 90% of this population being women. The population is using this network to cheaply transfer money between microfinance institutions over the Stellar network.
4. Blockchain-powered services for refugees and migrants
Current financial systems are very slow, involves manual and burdensome processes which makes it hard for immigrants to transfer money to their families residing in different countries.
Blockchain-powered services can make lives easier for everyone, for example, Regalii enables immigrant to pay their families bills globally through SMS. Another example is Ripple, it is a Blockchain based products that enables international remittances. It helps people to transfer money in any currency, anywhere in the world and almost instantly. Similarly, another Blockchain application called, WorldRemit provides an online service that lets people send money to friends and family in other countries, using a computer, smartphone or tablet.