Can blockchain promote financial inclusion?

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Africa is witnessing an increase in the use of Bitcoin. It is a fact. Moreover, the many events dedicated to blockchain on the continent bear witness to the general enthusiasm. We can now ask ourselves to what extent this can promote access to finance on this continent, which has to contend with a low financial inclusion.

Let us once again see the enormous potential of digital currencies to change the financial landscape in Africa. Moreover, let’s see how blockchain can largely influence financial inclusion.

It seems increasingly clear and clear that the new financial technologies (fintech) associated with the blockchain will be able to fill the shortcomings of the current system.

To make the article more fun to read, we decided to write it as a question and answer.

Hopefully this is more relevant for understanding the text.

1) Are cryptocurrencies the ultimate solution for people without a bank in Africa?

Interest in digital currencies continues to gain ground – in particular blockchain technology that has the potential to revolutionize the financial world. Similarly, blockchain-related financial innovations can more easily reach people without a bank.

One of the main attractions of the blockchain is its role as a large inviolable registry that can support decentralized applications that eliminate intermediaries. There is no individual, group or organization – such as a bank – that controls digital currencies or any other blockchain-compatible application. African countries are experiencing a slowdown in infrastructure, in particular because the same intermediaries are failing. They also exaggerate on people who are prone to corruption and poor craftsmanship.

With blockchain it is computer language and programming that replaces people. This gives an unsurpassed efficiency.

Everything about corruption is in the public domain. Everything is managed by everyone who participates in the network. Corruption is almost impossible at all levels.

2) Cryptocurrencies are used to facilitate payments from funds abroad.

Sending bitcoins to Africa has become cheaper and faster than through traditional institutions such as Western Union or Moneygram. Commission rates of 20% are indeed priceless for many people who want to send money to the family (mostly) who stayed in Africa.

A large part of the world population has no bank and cryptocurrencies can easily be deployed on mobile networks, providing access to financial capital in the most remote communities.

For countries with a weak banking and financial infrastructure in general, cryptocurrencies are in fact the ultimate means to create new ones.

There are 2.5 billion people worldwide who do not have access to banks or accounts, and most of them live in economically and politically unstable countries.

By using bitcoins to store wealth, you eliminate the chances of a local government expropriating money from a bank account. Similarly, if the country experiences devastating inflation as a result of poor financial management (such as in Argentina or Ghana), this is also the right way to secure its capital.

These are ongoing corrupt activities that affect not only individuals but also organizations, such as well-funded charities operating in developing countries. An investigation by the campaign group and ONE advocate It turned out that such corrupt practices result in an outflow of £ 585 billion a year from developing countries.

3 / Cryptocurrencies can succeed where banks have failed

With Bitcoin transfers, for example, a small trader in a remote region of a developing country can receive, send and store the capital needed to grow his business.

It can be paid for by its customers without having to rely on a complex, more expensive and less efficient infrastructure. Transfers in Bitcoin (or in another cryptocurrency) can open the way to a more international and immediate market for trade. .

Imagine the different possibilities that cryptocurrencies offer for the trading landscape. The ability to send money means that an independent trader or trader in the poorest regions of the world can develop a global business without having to rely on infrastructure that is paid for, approved and supported by the banking system and the government.

Moreover, the increased ability to access money can have a direct impact on the wealth of an individual and his community. Kenyan rural households adopting M-Pesa can only significantly increase their income through this innovative payment system. No more cash is needed to pay for this or that service.

Imagine what could happen if an international currency like bitcoin were adopted instead: the potential would be huge.

Moreover, a transparent blockchain system where people choose to spend their money – and that is the most important part of Bitcoin – will create the need for more transparency in the political and economic system. Finally, this is what we have the right to think and introduce ourselves.

Ultimately, this will give more power and equality to people who are often suppressed by their economic resources. For the first time in modern economic history, it would be the person who would have complete control over his finances.

3) What are the key challenges that must be overcome to successfully implement these new financial technologies, assuming there is a demand for them?

The biggest challenge will be connectivity; The internet connection in other words. Yes, the current and short-term problem with digital currencies is that transaction users need access to a smartphone and a good internet connection. It is inevitable that most people without a bank will not have access to it …

Without these elements it is even more limited to send or receive digital currencies than other transfers as currently permitted by M-Pesa, if we consider African countries.

And once connectivity is established, it is imperative that a dedicated ecosystem of technologists and young companies serve the under-funded market, by designing user-friendly products for a market that does not have the advantage of being born digitally. .

This is crucial to reach, help and encourage the bankless population fine financial inclusion.

Another major problem is the acceptance and liquidity of the local market. In other words, the frictionless exchange between the new currency and the local currency. This is even the biggest challenge that arises when using cryptocurrencies.

Despite these challenges, progress is being made. There are promising services for sending and receiving cryptocurrency that can change things in the near future.

The launch of cheap, high-quality smartphones can also reach the millions of people they need. In addition, the British company Kipochi has launched an innovative solution that allows users to send or receive bitcoins and convert them to and from an M-Pesa balance. It is only a matter of time before we see more adoption.

4) Which services are most expected for people without a bank via virtual currency?

There are incredible companies nowadays who work hard to promote the acceptance of cryptocurrency by people. These companies are taking steps to take advantage of the technology that will eventually flood many traditional industries.

Among the companies that – in my opinion – the best advanced blockchain technology are in favor of financial inclusion, we can quote:

  • Electroneum : A cryptocurrency that claims to be “light” and ideal for international payment transfers.
  • stable– with which you can ship Stablecoins internationally and reduce shipping costs.

Established banks and technology companies also test the potential of the technologies behind digital cryptocurrencies. IBM, for example, is researching blockchain as a technological backbone to create large-scale networks at low costs – much in demand in emerging economies.

Large banks such as RBS and Barclays are also experimenting with blockchain to develop banking systems that are optimized for blockchain.

These types of progressive companies together encourage acceptance and help create a global market in which we can all participate more universally and democratically.

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