The promise of technology seems endless. I can only wait to live the day when my grandchildren explain the latest innovations to me – fifty years from now. My imagination cannot bring me there today.
On the subject of access to finance, the future has already arrived in the form of blockchain technology and cryptocurrencies. It challenges my imagination what this technology brings and more importantly, to whom. Which challenges does it solve? What opportunities does it bring?
Blockchain technology and cryptocurrencies arrive hand in hand. “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value” (Blockchain Revolution, 2016)
Blockchain provides for a distributed database in which information is shared and secured, which in case of financial transactions cuts out the need for a bank as traditional centralised institution. Cryptocurrencies are the digital assets designed as a medium for value exchange enabled by this system of decentralised control provided by blockchain technology.
Considering access to finance, people in rural and urban landscapes around the globe face a diversity of challenges. Physical and digital infrastructure as well as actual presence and performance of financial institutions determine the services within reach. With support of a clerk behind a counter, a simple text message or an advanced mobile application you have access and control over your bankaccount, savings, loans and transactions – if you are lucky.
But there are unbanked landscapes in this day and age, not because of the arrival of technology from the future, but simply because infrastructure and institutions have never come into being. In the rural parts of Southern Sierra Leone, Village Lending Schemes (VLS) are the closest one can get to any form of savings and access to finance. It works like this: a VLS consists of 25 members, 1 box and 3 padlocks. Three members receive one key for one padlock each, only when all come together they open the box. Each week all members meet and they pay an agreed amount. There is a book of accounts and the amount contributed by each member is recorded, a procedure witnessed by all members. Over time the group savings allow for loans to individuals, which they repay with an agreed interest rate. A system built on trust, group effort and working with means available.
In some countries blockchain technology is motivated by an urge to regain autonomy and independency, moving away from institutions we no longer trust or which no longer serve us – unbanking the banked. In other countries, like Sierra Leone, the lack of infrastructure and institutions is the reason why these landscapes were never banked. It seems a long road from Village lending schemes to cryptocurrencies, but is there a short cut? Is it possible to fast forward towards unbanked landscapes, providing acces to finance through blockchain technology and cryptocurrencies? I hope to find out before my grandchildren arrive.
It starts with a grasp of the concept of blockchain and cryptocurrencies, access to internet – at least once in a while – and a phone and you could be on your way. In Asia, OmiseGo is the successful example of a company making headway in using blockchain technology to provide people equal access to financial services who before did not have access to the banking industry.