Blockchain Technology continues to offer opportunities to countries across the globe. For Kenya, it is opening up a $20-billion economy while also giving hope to American cities to be the great equalizer.
Opportunity for MSMEs
Kenya’s economy sees a bright future thanks to blockchain technology that has been helping its informal economies evaluate creditworthiness of traders. According to reports, MSMEs (Micro, Small and Medium Enterprises) in Africa can now bridge the $331 billion lending gap using the same technology.
According to reports, startups have turned to the use of distributed ledges in support of informal economies in countries like Kenya. People can look for loans faster and easier while also building up their credit standing. For instance, apps from IBM are now used to include the once unbanked population in the realms of business and finance. Additionally, experts pointed out previously that distributed ledgers are helpful in improving the organization of data.
Africa’s growth has been dependent greatly on access to finance and that is what blockchain can open up. If lack of finance is addressed then there will be more opportunities to rise for the region.
“Access to credit in the informal sector is not well-known because the data is neglected,” Bloomberg quoted Anzetse Were, a development economist based in Nairobi.
“If you want to penetrate markets in Africa, you need to have a strategy for the informal sector.”
East African banks are usually hesitant to lend money to small businesses because they don’t have as much information on their risk potential. Most often, they rely on their judgment.
“Currently, small businesses have trouble accessing credit, because they are assumed as a group, but if you have a good track record, you create your own score, therefore your performance in the credit market gives you access and better terms,” said Habil Olaka, chief executive officer of the Kenya Bankers Association.
Small businesses owner can use their phones to purchase goods from traders. Their phones store data and that data will be analyzed to develop spending patters and credit histories, including demand for goods and services.
“If you put the whole transaction history on the blockchain, then you have something that doesn’t change forever and you are forming the history,” explained Solomon Assefa, a vice president at IBM Research in Kenya. “This information allows the banks to expand their reach, the shopkeeper to access credit and the farmer to access the market.”
Blockchain will not solve everything but it has the potential to help those in Africa to improve on their credit for banks to differentiate their risk, which can mean larger loans or access to finance these businesses will not get otherwise.
The American Dream
For the United States, blockchain can reportedly be an equalizer for many of its cities. In Austin, for example, 2,000 homeless residents are part of a pilot program to receive a unique identifier that can be recorded safely and securely on blockchain. The identifier will help organize individual data and establish whether they need crucial services.
According to Brooks Rainwater’s article in Tech Crunch: “At the municipal level, blockchain has the potential to create countless smart networks and grids, altering how we do everything from vote and build credit to receive energy. In many ways, it could be a crucial component of what is needed to circumvent outdated systems and build long-lasting solutions for cities.”
Rainwater argued that if the technology is good enough for the wealthy then why it can’t be used and be enough to help people in poorer situations.
As arguments supporting blockchain have been emphasizing, the technology can be key to a more inclusive future. The same future is what Pearl Pay would like to create in the Philippines and globally. To learn more, go to pearlpay.io.