Blockchain’s ambition of providing a democratized finance is possible through the incorporation of microfinance institutions. Microfinance has been instrumental in transforming economies globally and addressing issues on poverty alleviation and income inequalities.
Blockchain technology, incorporated with immutability, efficiency, and transparency, can include the unbanked population in global financial systems. There are over two billion people in the world, with no access to financial services. Global financial inclusion from this unbanked population enables the international community to handle inequalities issues.
Financial inclusion opens opportunities for the entire economy and people. Economic systems can mobilize external funds, facilitate banks to allocate capital, and approve loans for social programs, small businesses, trade, and commerce.
Microfinance was configured to democratize access to financial assets. Microfinancing gives financial access that unleashes entrepreneurs and those venturing in small-scale businesses to make a viable income source, promotes saving habits by individuals, and creates employment opportunities.
According to the world bank, microfinance can create economic wealth for entrants engaged if carried out correctly. Nevertheless, microfinance faces some challenges from achieving its full potential. Fraud arising from mobile banking and ATM’s, redundant paperwork required to get financial services has derailed the objective for financial inclusion.
Additionally, a high number among this unbanked population hold low-income jobs and lack academic certification, which disbars them from capital intensive jobs. These microfinance challenges, including their high operating cost and slow transaction resolution, can be addressed by blockchain technology.
Blockchain technology with Bitcoin Up with robust data integrity at the system’s main is suitably stationed to redress these financial issues. Blockchain smart contracts-computerized transaction protocols execute a contract, which reduces the demand for intermediaries and general economic, operational costs. Since microfinance’s social mission is linked with its financial value, microfinance and Blockchain have a golden future if cost-cutting can be converted to lower interest rates.
Blockchain’s role in democratizing finance
Banking the unbanked
Banking the unbanked population has been on various news platforms for quite some time now. Blockchain was configured to democratize access to information and financial assets. Blockchain democratization of finance can puzzle out banking the unbanked, and current financial intermediaries may be excluded in the process.
Blockchain can be executed perfectly to meet technology’s initial goals by working together with microfinance and globally democratizing wealth creation.
Cutting costs of a transaction
Inter border transactions are marked by long waiting duration, rough paperwork process, and high fees. However, Blockchain transactions are transparent, immutable, and reliable with little transaction costs.
Cryptocurrency enables everyone to easily send payments across the world than the high fees needed to remit money overseas. The entire process takes a couple of days.
Google intelligence reports reveal blockchain technology will make one-fifth of digital identity by 2025, up from five percent this year. Such growth will be stimulated relatively through demand for autonomous identity.
Security matters need to be resolved before the establishment of digital identity systems. Enactments concerning customer information and privacy may differ from state to state, and Blockchain established programs could perform as impartial third party guarantors for digital identity security.