We are diving into the world of: Microfinance, Microloans, & Microcredit.
To properly approach this topic, let us start by explaining the concept of financial inclusion.
Financial inclusion is defined as the availability & equality of opportunities to access financial services.
Basically, access to basic financial services like, banking, loans, checking & savings accounts.
Today, over 69% of our global adult population has access to a bank account or some sort of mobile money provider. This is a statistic the world bank is extremely proud of.
“In the past few years, we have seen great strides around the world in connecting people to formal financial services. Financial inclusion allows people to save for family needs, borrow to support a business, or build a cushion against an emergency. Having access to financial services is a critical step towards reducing both poverty and inequality, and new data on mobile phone ownership and internet access show unprecedented opportunities to use technology to achieve universal financial inclusion.”
-Former World Bank President Jim Yong Kim
The World Bank appears to care about world finances. Setting up goals like; end extreme poverty by decreasing the percentage of people living on less than $1.90 a day to no more than 3%, & promote shared prosperity by fostering the income growth of the bottom 40% for every country by 2030.
Microfinance is a term used to describe financial services, such as loans, savings, insurance & fund transfers offered to entrepreneurs, small businesses or individuals who lack access to traditional banking services.
Microfinance is an age old concept. In past history, farmers would take loans from banks to purchase supplies for an upcoming season, with an agreement to give payment after goods are sold at market.
In recent times, micro financing has allowed property owners in Uganda update rental properties, aiding in a 30% rise in housing satisfaction. An unintended drop in infant illness was also observed by women who took micro loans to improve housing conditions.
With even more people having access to mobile phones, the availability of mobile banking is reducing the number of “unbanked” people across Africa. As the number of mobile accounts continues to increase, a new type of financial network is beginning to take shape across the continent.
The true value in a financial network as such is in the market opportunity & liquidity that will now be available to Pan-Afro people; black people.
How does Microfinance affect Pan-Afro people?
This new type of financial network will require new service offerings & tailor-made solutions for a new class of customer; a customer that has always been at the table, but is just now getting a service. A financial system that is to satisfy the needs of Pan-Afro people cannot be akin to any currently functioning financial system, although analogous functions will exist.
In 2002, researchers documented naturally occuring exchanges in Uganda, Botswana & Ghana. People were using airtime as a proxy for money transfer.
Kenyans were transferring airtime to their relatives or friends who were then using or reselling it as a form of currency. From this research MCel introduced the first authorised airtime credit swapping – a precursor step towards M-Pesa.
Today M-Pesa is a branchless banking service; customers can deposit & withdraw money from a decentralized network of agents with airtime resellers & retail outlets acting as banking agents within their communities.
It is a real-time decentralized banking system that has evolved to meet the needs of people, not attempting to mold them into “ideal users”.
M-Pesa has been leveraged to create micro credit opportunities for M-Kopa Solar system financing. As we highlighted in a previous Tech Talk, M-Kopa Solar is able to provide micro credit financing opportunities for their solar powered devices, with payments that are similar to the amount otherwise spent on kerosene or diesel.
This Microcredit model could be applied to other tools needed by those in developing areas.
For example; if farmers were able to purchase electric farm tools that were adapted to be charged by their previously financed solar panels, a strong foundation could be developed to permanently alleviate lack.
If down the line a guild of farmers were able to leverage their numbers & past credit history to purchase a tractor to increase production, shouldn’t they be allowed the finance opportunity?
In an age of new financial opportunities in new financial markets, built with tools of this information age, the diaspora needs a Peer-to-Peer lending platform that allows users with a mobile phone connection participate in this new form market.
With the development of blockchain & cryptocurrency technology, currency can now be developed for specific purposes –farm tokens for the purchase of farm supplies can be generated in proportion to amount available for lending for farming supplies.
Debts can be packaged & traded. Funds can be created. Companies could even go public & a stock market can be developed to allow international investment & development, connecting this decentralized financial network to the global financial network like never before.
Last year Nigerians in diaspora remitted $25billion to Nigeria, Senegal & Ghana $2.2billion to their respective nations. Africans already have the funds to fix African problems. A peer-to-peer lending group tailored to the needs of Africans in diaspora with funds to lend, & Africans in continent in need of funding would provide value to Pan-Afro people worldwide.