When you think about finance’s role in your daily life, what kind of interactions come to mind? You may spend a certain amount of money on everyday purchases, such as lunch, or coffee, with your debit or credit cards.

Similarly, you might also make regular trips to the bank to deposit and withdraw more significant sums of money to plan out your business expenses for the month. You may also think about the mortgage you have to pay every month or student loans that you must eventually address in terms of long-term financial planning.

If you’re reading this, there’s a good chance that you have access to a bank account. 

It’s also easy to take this simple fact for granted, especially since a large portion of the world doesn’t have access to basic financial services. According to a 2017 World Bank Report, somewhere around 1.7 billion people in the world that year did not have access to a bank account. Today, that number has climbed to over 2 billion.

Why financial inclusion matters

Financial inclusion is about more than just improving someone’s quality of life. 

Let’s take a quick look at who exactly are the “unbanked”.

infographic who are the unbanked decentral publishing cryptoAn individual can have many more opportunities if they have access to capital and can send and receive money quickly and efficiently.

However, the implications of financial inclusion are far more significant.

Individuals earning a low income often do not own the documents required to open a bank account, and cryptocurrency could make it much easier for them to participate in their local economy/community.

Financial exclusion also represents obstacles to the economies of entire nations since these individuals cannot start businesses or own property. Instead, many of these individuals are far more focused on escaping poverty than anything else, and their lack of participation affects the global economy.

How crypto is helping the unbanked​

Without access to traditional financial services, it is much more difficult for anyone to advance socioeconomically. Some individuals live in countries that lack a basic economic infrastructure, which means they cannot save enough money to buy and sell essential goods. For others, it may mean that a family does not have access to suitable loans to start a business or purchase a home. 

The beauty of cryptocurrency is that it breaks down many barriers to financial services. If you live in a world region where there is minimal banking infrastructure, you can still send or receive cryptocurrency as needed. In other words, cryptocurrency allows those who have been financially excluded from legacy banking systems to have access to financial services without worrying about documentation or a credit profile. 

A 2019 report concluded that simply adding financial identities to the world’s unbanked could add an additional $250 billion to the global GDP. Bitcoin and other cryptocurrencies could help bridge the gap for the unbanked and offer them an alternative to their local currency or allow them to send and receive money without creating a financial profile or account.

UNICEF is currently working on blockchain-based financial inclusion research thanks to its Innovation Fund. El Salvador, a country that has experienced severe economic problems over the last several years, has chosen to adopt Bitcoin as its legal tender. While there are still questions about how cryptocurrency will be regulated, it is clear that the topic is more mainstream than ever.

Increasing the velocity within local economies​

Traditional financial institutions like banks can take a long time to process specific transactions. Thanks to blockchain technology, cryptocurrency allows for money to be sent almost instantly to anyone in the world. More people can buy and sell goods and services, invest their money, and now, thanks to the DeFi ecosystem, earn passive income on their digital assets. Instead of dealing with a financial intermediary, it can all be done on a smartphone.

Let’s take the example of someone living in a rural area without access to a traditional bank. 

#1 Business accepts crypto
If the businesses in their community begin accepting cryptocurrency, they can build a “profile” and store their digital value on their smartphone.
#2 Individual can use digital wallet to send/receive money
They can then participate in the local economy without a bank account or credit profile, and can even send and receive payments across borders with little to no friction.
#3 All parties benefit from increased transaction times
Individuals can send and receive cryptocurrency almost instantly, which is much better for local economies and communities.

If cryptocurrency can help increase the “velocity” within local economies, this could lead to increased financial empowerment. That money can now be spent immediately, rather than people or businesses waiting for days for a particular transaction to be approved and processed.

Stablecoins can help address any volatility issues that might hinder mass adoption, as well.

The allure of microlending

When we discuss possible solutions that can help marginalized communities, microlending is often brought up as a feasible and economical way to empower and aid those who need it the most financially. The term “microfinance” describes financial tools offered to those who otherwise do not have access. 

One of the most well-known figures associated with microfinance is Muhammad Yanus, a Bangladeshi social entrepreneur, activist, and banker. He won the Nobel Peace Prize for his microfinance research, which focused on successful projects where he helped provide the rural poor with credit and banking services. He founded the Grameen Bank, which aims to offer microloans to the impoverished. 

The beauty of the loans was that it required no collateral, meaning that even the poorest could have access to a loan. Blockchain is decentralized, and microfinance already operates on a decentralized peer-to-peer model. Similarly, many believe that blockchain technology can fuel and facilitate microcredit and microloan programs that can help the unbanked and impoverished.

Many cryptocurrency experts believe that blockchain can address some of the most critical risks of microfinance. Specifically, blockchain offers improved transparency, quicker and more efficient transactions, and reduced transaction costs. One of the biggest issues with microfinance is that it was difficult to make the microloans profitable, but a decentralized loan on the blockchain could potentially solve that pain point.

The ultimate truth is that neither microfinance nor blockchain can single-handedly address global inequality. However, they both can potentially help us move forward into a society where finance is much more accessible and democratized.

The future of the Unbanked

It is clear that blockchain and crypto can help the global unbanked population, but time will tell what exactly that looks like. 

With over 2 billion in the world who are unbanked, there’s no doubt we can do more to help the underprivileged.

“Uncensored” has more answers

It is clear that blockchain and crypto can help the global unbanked population, but time will tell what exactly that looks like. This is just one of many insightful topics that our exciting new docuseries, “Uncensored Crypto,” delves into.