It is no secret that inclusion in the international financial system is tightly connected to people’s wellbeing. While the population of developing countries worldwide suffers poverty, fintech innovations including blockchain technology can help these people improve their life.
It is well-known that banking helps people a lot. Since the introduction of a core banking system in the 1970s, many people have got a chance to make their life better with the possibility of obtaining loans or earning interest from their savings. However, these services were accessible only for wealthy people from developed countries. But what about the rest of the world?
Most citizens of developing countries mainly from Africa and Asia are unbanked or underbanked. Therefore, they have trouble getting basic financial services like obtaining a loan for opening a business. On the other hand, as many of them are forced to work abroad to keep their families, they also face trouble while trying to send funds back home. Obviously, all this doesn’t make these people’s life easier.
While developed countries treat fintech innovations with a great deal of suspicion, those with a great percentage of unbanked population willingly embrace them. No wonder, these technologies are able to facilitate their inclusion in the international financial system.
Fintech is a great opportunity for the country’s entire economic supply chain, from consumers to businesses to financial brokers. It is a fundamental tool for businesses to gain greater access to the capital market, social capital, and debt capital market. It also ensures the financial inclusion for those who have trouble accessing traditional banking.
A good example is peer-to-peer (P2P) lending platforms, allowing for providing loans from user to a user, without involving intermediaries. No intermediaries, no additional fees, meaning that people are able to get cheaper loans with lower interest rates. Another bright illustration of embracing innovations is the introduction of mobile payments.
The technology was introduced in the early 2000s and allowed to use mobile accounts for making payments. One of the most popular examples of such a service is M-Pesa. First launched in Kenya, the service then expanded to Tanzania, Mozambique, DRC, Lesotho, Ghana, Egypt, Afghanistan, South Africa, India, Romania, and Albania. Since its inception in 2007, M-Pesa has helped around 850,000 people to improve their wellbeing.
Another tool fintech makes accessible to the citizens of developing countries is crowdfunding. Various platforms including blockchain-based ones assist people in raising capital for growing their business. What is good about crowdfunding is that it allows businesses to raise small amounts of money from a large number of people. Thus, it is not necessary to seek for big investors. On the other hand, blockchain-based platforms ensure transparency and traceability of investments. Therefore, anyone who takes part in crowdfunding is able to see where their money goes.
As poor countries embrace innovations for their unbanked citizens, those willing to help also join various initiatives. As coinidol.com, a world blockchain news outlet, reported, a non-profit organization Heifer International started exploring the potential of cryptocurrency to help poor farmers to gain financial inclusion. It joined the Libra Association, believing that Facebook’s anticipated stablecoin is able to help them with their mission.
Global organizations like the WHO and the United Nations (UN) also explore the way blockchain can help to grow business in developing countries. They are looking to adopt this tech to provide legal entities for more than a billion people without any legal documents.
Back in 2018, nearly 500,000 refugees received cryptocurrency payments within the World Food Program, proving that digital currency can actually be helpful when delivering aid to those that are excluded from the financial system.
Generally, fintech instruments have the potential to disrupt the entire world by changing the way people transact and make payments. As the pandemic of coronavirus made people get isolated from each other, digital technologies and solutions become more and more widespread on a daily basis. For instance, in the Philippines, where about 90% of the adult population does not have a bank account, the use of cryptocurrency for payments has skyrocketed since the COVID-19 outbreak.
The trend for fintech seems to be long-term and irreversible. Although coronavirus intensified it to a great extent, it is not likely to weaken with the stop of the pandemic. In the nearest future, the world might see an increase in projects and startups offering fintech services, as well as new innovative solutions in the field.