By Sai Hnin Aung, COO and co-founder in MicroMoney

I am completely sure that financial exclusion can really be eradicated. That has become possible due to the lending industry I have the honor to belong to.

Our social business idea hasn’t arisen out of the blue. For centuries people have been trying to solve the problem of inequity: why do some enjoy their riches while others struggle for services they have no access to? The genuine revolution is being made by blockchain companies today.

On the one hand, this bank rule may be senseless and not effective: people with no credit histories are not creditworthy. They won’t get a loan if they don’t have credit rate, or they can’t provide any collateral, or moreover, work so hard that they have no time to collect the necessary papers. So they stay unbanked because the decision to approve a credit for such people contradicts to all the rules which bankers used to abide by.

Critics often mention that microloan services don’t contribute much to economic progress. However, people who do not have access to bank services are a promising target audience.

Financial exclusion restrain the economic development?

Sometimes, I don’t understand: what do they mean by saying “economic progress”? How can it be measured: by income per head? Or by consumption per head? Or something else? Meanwhile, it is difficult to renounce an idea that the essence of the development is made up of the life quality changing for the low-income half of community. However, the quality of life isn’t determined by the size of a consumer basket only. It also includes an enabling environment that let people realize their ideas. This is more important than any other criteria of the income or consumption level.

Lending services help to launch engines providing economic activities of socially divested part of the community. As soon as quite a big quantity of these tiny motors start working that will provide conditions for serious changes.

Our company, MicroMoney, has studied the problems which are common to the lending industry, and we have tried to find why a distrust for unbanked people still exists. MicroMoney is a global fintech company providing the access to social loans for unbanked people on emerging markets and the access to the emerging markets’ audience for banks, trade, and financial organizations. So we have investigated decisions which can be quite effective. Distrust and corruption explain the significant part of problems arising on emerging markets nowadays.

What is the solution?

We found the solution in the blockchain. The blockchain first achieved its glory as the backbone of cryptocurrency. By using distributed networks of computer users to record and secure transaction data almost instantaneously, the blockchain has the potential to bypass the need for correspondent banking and other intermediaries for international money transfers. However, for those who lack an entrée into basic financial services, blockchain’s accessibility and scalability could make it a practical gateway to the global economy.

The blockchain is the way of storing data or digital ledgers for transactions, deals, contracts — all that is needed to be registered separately, kept securely, and, if it’s necessary, to be checked. It is possible to keep data of approved loans, property rights, driving offenses — almost everything. Its main difference and the incontestable advantage are that data are not storing in a single particular place. The data are distributed among lots of computers all over the world. Every network user has a free access to a relevant version of the ledger that makes it transparent to all the network participants.

Blockchain technology provides:

a high level of reliability. It is the most important advantage for users. High level of security and mutual trust among participants are provided, in particular, by the smart contracts;

availability. To support services there is no need in centralized and expensive IT infrastructure.

the absence of mediators. People can interact with each other in a trusted environment. There is no need for an agent to control all the processes.

All these benefits inspired us to use blockchain while providing social loan services. MicroMoney’s mission is to give a chance to billions of unbanked people to become a part of banking economy, to start small businesses, and to get medical care and education. And blockchain fully meets its mission.

Beat financial exclusion with blockchain

Financial exclusion is the inability of individuals to access necessary financial services. It is difficult to imagine living without having any access to basic banking services as cards, transactions, insurance, credits, services. However, an estimated 2 billion adults worldwide do not have it.

It requires a huge amount of investment for traditional banks to bring their services to emerging markets. Digital finance as financial services delivered over digital infrastructure might be a solution. The blockchain is the new foundation of economic progress, and this looks quite like a financial revolution, by the way.

Some blockchain-based technologies play important role in gradual financial inclusion and transformation from unbanked to banked. Blockchain can beat financial exclusion due to better access to financial services, transparency, and economic integration. For instance, ID2020, the project, supported by the United Nations, is a digital ID network using blockchain technology and providing a digital ID for everyone. Without an identity, you can’t access education, healthcare, insurance.

Financial services could become available for unbanked thanks to blockchain as well. MicroMoney has developed the mobile scoring system based on neural networks and blockchain that allows estimating customer’s creditworthiness remotely just having an access to a customer’s smartphone data. If system approves a social loan, then a client gets it instantly and becomes included in blockchain that keeps the history of all transactions. One of the main advantages of the technology is that it allows systems of different organizations to communicate with each other and it means that other organizations will be able to receive all necessary information about a borrower in order to offer him or her a customized range of other services available now. So a customer not only satisfying the bare necessities of life but also can to launch or develop an own business. This way blockchain creates real long-term value and long-term economic involvement and integration.

The unbanked people have now very limited access to banking services. In situations of extreme urgency, need for medical support, education, they have no way to solve their problems. Blockchain and lending companies can solve it. And will do.