Sierra Leone President Julius Maada Bio addresses the 73rd session of the United Nations General Assembly, at U.N. headquarters, Thursday, Sept. 27, 2018. (AP Photo/Richard Drew)ASSOCIATED PRESS
The President of Sierra Leone, Julius Maada Bio, announced in September 2018 that Sierra Leone was going to use the blockchain in combination with the United Nations and Kiva.org to help the unbanked in Sierra Leone build credit histories.
Using the new Kiva Protocol (built on open-source Hyperledger technology), the hope is that the unbanked will be able to build a layer of identity that accumulates information about currently untracked financial activities such as the repayment of micro-loans.
Kiva will administer access to the nodes, but partners such as banks and nation-states will be able to control nodes within the Kiva Protocol. There will be no tokens issued.
In 2017, the World Bank reported that there were about 1.7 billion people in the world who were unbanked, a decrease from the 2 billion who were unbanked in 2015. The unbanked are disproportionately located in developing countries. India, China, Pakistan, Indonesia, Nigeria, Mexico and Bangladesh together host about half of the world’s unbanked — meaning that even with blistering economic growth, a lack of financial inclusivity means that progress is not distributed evenly.
The unbanked tend to be the poorest in a society, and lack of access to financial records and services means they can become stuck in a cycle of poverty. This worsens existing inequalities: the majority of the unbanked are women, most unbanked individuals don’t have high school education, and almost half of the unbanked are outside the labor force.
This collaboration around the Kiva Protocol sparked from Sierra Leone’s work to digitize essential financial records with the support of the U.N. Capital Development Fund (UNCDF) and the U.N. Development Programme (UNDP). Since 2016, Sierra Leone has been working with the World Bank and the UNCDF to modernize the financial records of its citizens. In that time, it has managed to digitize the records of over 5 million of its 7.1 million citizens. Working with the Kiva Protocol is a natural next step.
Kiva adds technical expertise to the project and a layer of data. The organization has worked with people across 80 countries and 1.7 million lenders to provide $1.2 billion in micro-loans. Kiva can add its own data (repayment of micro-loans) to data from its partners. It also has the team, culture, and technical expertise to deliver.
With a 96% repayment rate, Kiva is hoping to take its success in micro-finance towards access to financial records.
By interviewing 100 of their borrowers, the Kiva team came to the conclusion that the biggest financial roadblock for the 1.7 billion or so cut off from traditional financial services is the lack of a consolidated identity layer. With a reputation for repaying, access to credit doesn’t have to come at punitive rates.
With 500 of its partners in 80 countries around the world holding a rich amount of credit data, Kiva Protocol aims to be a platform for self-sovereign ID, one that will hit the ground running in 2019 with at least one country already championing its use. With a layer of credit provided to the majority of its citizens, the government of Sierra Leone could also use this identification mechanism to provide other essential services.
Since it’s a federated data structure rather than one that is completely centralized, the Kiva Protocol is also keeping its eyes set on other countries and use cases, though it’s focused squarely right now on implementing the Kiva Protocol in Sierra Leone. They’re looking to cover about 5 million people by the end of the year. There has been inbound interest from other countries in the meanwhile.
Broadly speaking, the goal of Kiva is to promote global financial inclusion, and they’ve taken one big step towards it with blockchain.
“With this partnership in Sierra Leone, we hope to carve a path to a system of global identity and federated credit history,” said Kiva CEO Neville Crawley. “This can unlock capital for the populations who need it most, allowing lenders to massively increase services and the flow of funds to the world’s unbanked.”