Ahead of Traditional Banking: How Africa Employs Blockchain For Financial Inclusion

On September 27, at the 73rd Session of the U.N. General Assembly, Sierra Leone's president Julius Maada Bio made an announcement where he declared that his country had set a new goal to create a national, blockchain-based credit bureau to "Radically transform" the country's financial inclusion landscape.

According to the World Bank's financial inclusion database, in 2017 there were around 1.7 billion adults who are technically unbanked, which is roughly 30% of the global population.

The underbanked either don't have literal access to regular banking or don't meet conditions of a financial institution.

With blockchain individuals can receive a digital identity for use in their banking - all they have to do is own a smartphone, while biometrics will do the rest.

"Currently, unbanked people cannot leverage financial transactions from the 'informal economy,' such as credit with a local shopkeeper, to build their credit history. The Kiva Protocol will capture a wide range of financial transactions to help people access the financial services they need, including loans for businesses, education or basic medical services."

Will Africa leapfrog the banking system altogether?

The same could happen with banking - the unbanked population of Africa can hardly be approached by brick and mortar financial institutions at this point due to the high costs of infrastructure and overall low income level of local population.

The banking gap in Africa could indeed be closed by way of cryptocurrencies and other fintech solutions.

As BBC reports, many Africans have started to turn to cryptocurrencies due to low remittance rates and the state of traditional banking in the region, while The Economist suggests that Africa has become ripe with various startups, "Allowing lenders quickly to assess credit risks, insurers to sell life and medical cover in small chunks and new energy firms to sell electricity by the day or week".

Makhtar Diop, Vice-president for Africa at World Bank Group claims that tech startups in Africa raised $129 million in funding in 2016 alone, while the number should most likely be higher for 2017 and 2018, with continuing blockchain adoption.