Disclaimer: This is written as part of Sentinel-chain’s proof of support campaign

Financial inclusion is a rising topic in the blockchain sphere. Estimated 2 billion adults without adequate access to financial services present a major roadblock in fight against poverty and a very lucrative untapped market all in one (Accenture in 2015. published estimate that “unbanked” market could be worth as much as 380 billion dollars!). This win-win scenario makes a very compelling elevator pitch.

But before going further let us first define the terms financial exclusion and inclusion.

Financial exclusion

The term financial exclusion was first coined in 1993 by geographers who were concerned about limited physical access to banking services as a result of bank branch closures (Leyshon and Thrift, 1993). Over time due to the growing body of research relating to difficulties faced by some sections of societies in gaining access to modern financial services the term was redefined. One definitions is:

Financial exclusion refers to a process whereby people encounter difficulties accessing and/or using financial services and products in the mainstream market that are appropriate to their needs and enable them to lead a normal social life in the society in which they belong. (European Commission, 2008.)

Financial inclusion

World Bank defines financial inclusion as:

that individuals and businesses have access to useful and affordable financial products and services that meet their needs — transactions, payments, savings, credit and insurance — delivered in a responsible and sustainable way.

The “unbanked” puzzle and the blockchain

Traditional finance sector, entrepreneurs and various fintechs have been trying to solve the puzzle how to reach the “unbanked” population for a while now. From today’s perspective it is clear that one of key prerequisites is building a robust connected digital ecosystem. Blockchain’s security and potential to simplify and streamline processes makes it a match made in heaven for many of the use cases, e.g. transactions, loans, remittance, insurance, notarization, supply chains…

With blockchain startups reinventing everything it was only a matter of time before some turned to this compelling “niche”. As a financial inclusion enthusiast I have been following the scene for a while with interest. In short there are not many intriguing projects.

Why?

Most of the projects envision end to end solutions or plan to offer “transaction services to the unbanked” utilizing disruptive technology to build the ecosystem! Unfortunately their white papers rarely address the big picture in a meaningful and consequent way.

To put it simply financial inclusion is a complex issue. To tackle it one must take into account regulators and local legislation, infrastructure, digital connectivity, identification (KYC is one of major obstacles to obtaining access to the financial services), different languages and culture… There is a myriad of pieces to this puzzle and it is a daunting task for any one project to tackle. And finally there is a question of the adoption. How will these companies bring their product to the prospective clients? How will they reach the sub-saharan or South Asia natives? Honest or better said most likely answer is they will not.

The thing is that the ecosystem is already there! Thousands of microfinance institutions operate all over the globe. They have the local understanding and even more importantly the presence and the experience in interacting with the unbanked.

This ecosystem is far from perfect. It has issues with transparency, efficiency, corruption… These institutions lack the digital back office infrastructure. They struggle with extremely high operating costs and have poor access to overseas funding. It has a long way to go.

And this is what Sentinel Chain gets right! It understands that what these institutions need are digital tools that empower and enable them to take the next step forward. There are many exciting young companies developing and already providing affordable and flexible “core microfinance systems” as an alternative to traditional expensive core banking systems. Take a look at Instafin by Oradian as an example of SaaS banking solution for financial inclusion.

Sentinel chain brings to this ecosystem a unique addition: a B2B marketplace for financial services and the ability to accept livestock as a collateral.

These two points if adequately implemented will provide a huge cornerstones for microfinance institutions going forward. The ability to turn nominally dead capital (livestock) into a collateral provides the basis for new products with better terms to be offered to the unbanked. Access to overseas financing with use of SENC token as a collateral in combination with cheaper digital solutions will help lower operating costs. The costs and complexity are often cited as one of main reasons for high fees/interest rates (microfinance loan principals are relatively small and the cost of making a loan is fixed). Sentinel chain and the other players in financial inclusion field will provide a way to optimize and further develop the process.

The question of financial inclusion is very important for fighting poverty and improving quality of life. Without regulated and accessible financial services the poor and socially marginalized people are put in an even worse position when it comes to disasters, personal emergencies and lifecycle needs. Financial inclusion has been identified as an enabler for 7 of the 17 Sustainable Development Goals by the UN. With that said there is also a lot of fair and necessary criticism on the current microfinance practices and models. Do they generate the positive effect they claim? It is an important discussion and we need it to find what works. As a blockchain supporter I am positive that blockchain technology can be an integral part of the formula to do it right.

Why Sentinel Chain?

The clear vision of its place in the existing ecosystem, proposal of the livestock provenance solution and global marketplace for financial inclusion makes me very hopeful about this project and excited to see how they will progress. Sentinel Chain is trying to bring something new to the table. It cleverly addresses key questions of transparency, collateralization and funding while providing additional value through CrossPay application (identity, asset tracking…). The roadmap is ambitious with concrete steps already in 2018. Crosspay launch in Q4 will set the expectations for the future. As with any great idea in the end it all comes down to the execution. If the Sentinel Chain’s team is able to deliver the project will be one of the integral elements of the financial inclusion market. Any provider of the microfinance services will have to find a way to integrate Sentinel Chain’s marketplace in the bid to become or stay relevant.

I follow many ICOs and blockchain projects as an investor but the Sentinel Chain falls in a small group of projects I follow as a fan. I will root for it and hope that it is a great success because this platform will provide new opportunities for the people that need them. In an (in)direct way it can help ensure a better life for many. You should root for the Sentinel Chain too.

For more on the Sentinel Chain project:

Website: https://www.sentinel-chain.org/

Medium: https://medium.com/sentinelchain

Twitter: https://twitter.com/sentinelchain

For more on the financial inclusion:

http://www.worldbank.org/en/topic/financialinclusion

http://www.un.org/sustainabledevelopment/sustainable-development-goals/

https://en.wikipedia.org/wiki/Microfinance

https://oradian.com/

https://www.accenture.com/us-en/insight-billion-reasons-bank-inclusively