This is a guest post by Madhawa Edussuriya, the director (Sri Lanka department) of MicroMoney, the first blockchain-based credit bureau and social microfinance company.
Unfortunately, we started a new millennium with revealing a new term describing a new form of people’s inequity. There is now a special term for people who don’t have access to the main financial services allowing them to improve their lives – the “unbanked”.
There are approximately 2 billion of such people in the world and not only in emerging markets or third-world countries, as you might think. China shows a great and fast development pace but still has 21% of unbanked. Even in the US, you can found more than 50 millions of undiscovered and unbanked people.
How could it be? There are two interrelated reasons: the absence of the credit history or any credit rating and cash-oriented way of living. Seeking to verify customer’s creditworthiness banks often ask for an existing credit rate, however, the unbanked people cannot provide it because they used to cash only – salary in cash, savings in cash, and quite often for the emerging markets – small business operations in cash.
So they have to follow very strict requirements in case they want any service from a classic bank – a various (and large) number of paper-based documents, the collateral for a loan and people to vouch for them. These conditions are the fence that a lot of people can’t jump over sometimes.
The path to economic inclusion might be surprisingly found in the blockchain technology. It allows to securely, immediate, and cost-efficiently store and move the data and the money within a decentralized online ecosystem and this way to organize fast and cheap financial transactions between millions of users.
For our company, MicroMoney, it means we can organize and host an affordable and convenient environment where users can apply for a loan online, to share their information with businesses receiving a reward instead and to build their digit identity from scratch.
Blockchain disrupts the classic banking allowing customers to prove their creditworthiness without paper-based documents and previous credit rating, and banks – to get the access to the untapped audience hundred times cheaper and to manage risks in an intelligent manner.
MicroMoney has two years of stable and successful business in this field. I think our company is a good example of a fintech company and a lending services provider that can implement the blockchain principles into its business model. First, a borrower applies for a loan online in our mobile application, and no need to call us or to visit our office.
Then our smart self-learning scoring system analyses data available from a client’s smartphone based on neural networks, machine learning, AI algorithms, and Big Data. It goes through thousands of points of rich data, evaluate a client’s creditworthiness with an accuracy of more than 95% and then makes a decision whether a loan approved or not automatically. The approved money are sent to a customer’s e-wallet – online again.
Now the company is going to run its token distribution campaign on 18th October 2017 in order to make our business model even more blockchain-oriented. We are building a first ever blockchain-based credit bureau with the goal to enhance living standards for the unbanked people in emerging countries by granting social loans at low interest depending on the digital identity a borrower can start and increase within our ecosystem.
This way blockchain can help people who have no access to financial services to start building their credit history in our ecosystem and then to use the gained scoring rating to apply even for traditional bank services. At the same time, these classic financial and other services can reach their credit histories and the other information to reduce any risks and to extend their own audience.
MicroMoney now works in Cambodia, Myanmar, Indonesia, Sri-Lanka, and Thailand and our statistics shows that nine out of ten MicroMoney’s customers apply for the first ever loan in their lives – and get it. So our mission to help millions of the unbanked is not just a charity idea – right now thousands of our clients get the access to the financial services we are promising.
Thanks to the blockchain technology borrowing money is available almost immediately to solve urgent needs and daily problems and to bring unbanked and unserved people into the global economy.
Madhawa Edussuriya is the director of MicroMoney Sri Lanka.