As developments in technology and innovation sector pave the way for, on the one hand, more efficiency and transparency; on the other hand, lower costs in financial transactions in a global scale, the promise of driving “social impact” becomes a closer target for diverse industries. As an infrastructure transforming traditional financial relations, which can trigger the occurrence of new platforms and projects to alleviate poverty and social inequality in the global scale, Blockchain technology can be termed as a new infrastructure in which a wide range of economically disadvantageous groups can take place as economic actors in the age of digitization.
As more social organizations businesses are increasingly being aware of the value of blockchain technology as a platform that opens up new spaces in today’s economic and social relations, this technology has started to be perceived as the innovative vehicle for social change in the digital age. Although we cannot claim that Blockchain will bring global poverty and social inequality to an end, it’s highly crucial to realize its potential to enable solutions to poverty in global scale that previously wasn’t thought to be possible.
Financial inclusion for poverty reduction
Upon taking into consideration the existence of 1.7 billion unbanked people in today’s world, it’s obvious that a new mechanism for financial inclusion that is the linchpin of poverty reduction is an urgent need. Since most of the banks are mainly relying upon the data obtained by their traditional credit-scoring mechanisms while making a decision on providing loan for their customers, the economically disadvantaged groups are seen as “unviable customers” by most of these traditional financial institutions. Additionally, in developing countries, now that there is hyperinflation of legal tender, high transaction costs e.g, it can be said that the traditional financial system is more inaccessible for particularly the poor. However, apart from existing digital payment systems, blockchain technology has been for a while used by diverse organizations and private companies to provide access to financial services for the un/underbanked by reducing high commissions, removing formal infrastructure requirements, and facilitating personal accounts and microcredits with the help of self-sovereign digital identity system. Accordingly, today we can see the increase rate in financial inclusion by 18% since 2011 when account ownership is 51 percent. At this point, it can be said that recent progress has been driven by the developments in digital payment systems through new innovation and technologies like Blockchains. Through Blockchains’ decentralized network, the expensive fees and other charges burdened on users by banks or other intermediaries like Western Union, Uni Transfer e.g can be handled by blockchain platforms.
In addition, blockchain as a data source with more transparent and better algorithms, it can be considered a critical actor in shaping loan amounts and their interest rates, which can contribute to the budding microfinance ecosystem.
Digital identity for everyone
For financial inclusion of most un/underbanked people, another obstacle is the lack of provable identity. For example, according to a 2014 World Bank survey, 18% of the unbanked could not get access to banking and financing systems owing to the lack of proof of identity. On thinking the challenge for the people who are devoid of a provable identity to access not only financial opportunities such as opening a bank account, obtaining credit or cash transfers, also social benefits like vouchers, pensions, insurance, vaccinations, and maternal care, we must lay weight on new attempts aiming to be helpful for both financial inclusion and social integration of these people in today’s world.
It’s a ray of sunshine to be able to tell about so many projects with a promise of deploying self-sovereign and decentralized identity solutions to provable identity problem through Blockchain technology in recent times. For example, through the Blockchain infrastructures aiming to prevent fraud, increase transparency and efficiency, the projects like ID 2020, BitNation, Taqanu, and The Humanized Internet are all working to provide verifiable identification to those who lack it in today, while concerning social and financial inclusion in the global scale.
Considering the necessity of digital identity from a more specific angle, another project, Rightmesh especially draws attention to the critical importance of connectivity and claims that without the connectivity right into the hands of people, it’s not so likely to eliminate the corruption and consequently, provide either financial inclusion or social integration in global scale. As stated in Rightmesh’s whitepaper, connectivity right means to have an ability to control who may possess our data through the apps that operate without a centralized infrastructure to manipulate this data in a meaningful way to extract value. Accordingly, they emphasized “Connecting the Next Billion” as part of their global missions aiming to lift 100 million out of poverty.
Mobile phones and the internet have already offered the changes for connectivity of people. According to Global Findex Database 2017, globally, one billion financially excluded adults already own a mobile phone and about 480 million have internet access. At this point, it’s of critical importance to sustain the collaboration between businesses and social organizations to expand opportunities facilitating the usage of accounts for financial inclusion. Today, companies pay wages in cash to about 230 million unbanked adults worldwide; harnessing electronic payrolls enable these people to take place in the formal financial system. However, without actively used financial accounts that are “building blocks” of saving and borrowing, no matter which projects are launched for the aim of financial inclusion of un/underbanked people.
The more transparency, the less poverty
Another way blockchain can be used to alleviate poverty is by limiting corruption. As a distributed ledger, this technology provides unprecedented transparent means of recordkeeping through the smart contract mechanisms, which enable transactions like proof of property including land titles and other asset certificates as well as payments to be stored in the distributed ledger. Therefore, it’s now very unlikely for the status of ownership to be manipulated in blockchain age, since any data in its decentralized network cannot be tampered without the decision of the majority. Accordingly, we can also mention newly emerged projects like Mattereum integrating Blockchain technology into the land registry system at this time. As the legal, technical and commercial infrastructure layer for on-chain property transfer and control, Mattereum is using the “automated custodian” that is termed as legal counterparty to a smart contract by this company to maintain the authoritative register of property rights, legal ownership and financial interests in assets without requiring any new legislation. Indeed, when the manipulative practices of land grabbers like rigged titles and falsified documents, which cause small scale farmers to be driven out of their agricultural lands, are taken into consideration, this project is “great white hope” to reduce poverty in the global scale.
Colendi: New address of financial and social inclusion in the digital age
As I mentioned in previous parts, it’s of paramount importance for us to have control over our private data in order to reduce corruption and consequently to contribute to the poverty reduction in global scale. In that sense, like its counterparts, Rightmesh and Mattereum, in the digital market, Colendi platform creates a mechanism that aims to eliminate “fraud” with its machine learning algorithms and slashing mechanism that protect both real-time and historical data of each user from any imposture and privacy-violating act in each node. Colendi platform is a Blockchain-based microcredit platform and credit scoring mechanism based on a broad range of data like smartphones, social media, transaction histories of users. It is accomplished through its above-referred machine learning system unlike the traditional scoring mechanisms based on the track records of their customers. As the source of data expands and leverages, it is more likely to get reliable information about borrowers to measure their creditworthiness in a more “fair” and “inclusive” way. Accordingly, we are so pleasured with declaring a part of our mission as providing financing opportunities for the new markets of un/underbanked people and businesses. Particularly, two main mechanisms of Colendi project, Colendi ID and Colendi Score, can be major contributors to the combat against global economic and social exclusion of some groups in the age of digitalization.
Although there have already been so many projects and planning trying to integrate blockchain technology to their market strategies with the promise of creating “social impact”, Colendi puts forth its eligibility as a new actor in digital market aiming financial inclusion and real shared economy through its a wide range of tools from Colendi ID which is a global, decentralized and autonomous financial passport to Colendi Card, a physical payment tool enabling users access to microcredit with their established Colendi score in a secure Blockchain-based way.
With the promise of financial inclusion, Colendi protocol was designed to reconstitute financial scoring and to be a new chance of un/underbanked people in microcredit markets. After users create a Colendi ID by providing their identity parameters and information in Colendi ecosystem through Colendi app, all network-related events are recorded step by step on Blockchains to update Colendi scores of users. At this point, we can properly say that through more fairly measured credit scores and consequently, more opportunity to get microcredits for un/underbanked people in Colendi platform, these people can fairly take place in the digital market as self-confident economic and social actors.