In the sophisticated world we live in right now, the only thing that possibly stands common in one form or the other from the ancient times is banking. Let us take a look at how banking systems function in a heterogeneous community like Africa and how implementation of modern financial systems can be useful.
Africa is a diverse country, especially in terms of Financial systems with both world-class standards and as well as unscalable, small entities still struggling to get out of the economic repression.
With high prevalence of poverty, only around 20% of Africans have access to banking services as opposed to 30 to 40% of individuals in other developing countries. Major reasons for the same include higher fees/ documentation requirements for opening an account and less branch penetration ratios.
On the other hand for banks, access to individual credit worthiness and history for financial operations is again a challenging task, making this a vicious cycle between customer and their financial counterparts – the Bankers.
On the technical perspective majority of these issues or cost due to lack of available infrastructure and lack of interoperability measures between banks thus paving way for high operational costs.
One simple and significant solution to all of the above problems is the complete adoption of Blockchain based Network.
The use of an established global Blockchain ecosystem such as the Bitcoin or Ethereum Network not only ensures Global level interoperability but also near zero investment or infrastructure requirements, relying on existing miners to facilitate transactions and hence need a working Internet connection only.
Also since the blockchain works on openly distributed ledger, the problem of credit assessment of individuals is also solved with the credit history of each individual/ institution available on the network to everyone, ensuring trust and transparency amongst both the parties.
This in a way also paves way for peer to peer cash exchanges via “smart contracts” inside communities making access to money possible for even the poorest of the poor without even having to rely on a third party financial institutions with restrictions on minimum balance requirements, etc.
The poor don’t lack capital; it’s that they can’t monetize it. Fixing that, is the most important thing you could ever do to foster economic growth.
Usage of Blockchain is not only limited to financial domain but also in other fields like registering and recording land/property ownership that is untamperable. Thus technology such as Blockchain has a immense potential that is yet to be realised, especially in Africa.