The opportunities and challenges of blockchain-based solutions to improve access to entrepreneurial financing for the poor
Various ICT-based solutions have been developed to improve access to and affordability of financial services for the poor. In the past few years, numerous blockchain startups have launched platforms and applications to expand entrepreneurial financing opportunities for the ultra-poor. This study extends the research on ICTs’ impacts on entrepreneurship and financial services by studying how blockchain can provide new entrepreneurial financing opportunities. Through case studies of four start-ups, it demonstrates how blockchain can facilitate disadvantaged entrepreneurs’ access to finance with the creation of secure identity, aggregation of trustworthy and relevant information to enhance creditworthiness and stimulation of impact investments. The article also suggests that blockchain could make entrepreneurial finance more affordable with its micrometering feature, low marginal costs of investment and ability to foster disintermediation and decentralization. Theoretically investors are able to track indicators that are linked to the goals of a project. Blockchain-based solutions enable disadvantaged groups to control and manage their personal data and information and use them to increase creditworthiness. In this way, these applications seek to bring economic empowerment to microentrepreneurs. Blockchain can thus make it possible for poor people to obtain credit with dignity. The case studies indicate that various difficulties may be encountered in translating these theoretical ideas into practical strategies on the ground. To this end, organizational, institutional and social challenges in realizing the potential of blockchain-based solutions in extending financial services to the poor are discussed.
Nir Kshetri is Professor at University of North Carolina-Greensboro and a research fellow at Kobe University. He has authored nine books, one of which has been selected as an Outstanding Academic Title by Choice Magazine. He has also published about 140 articles in various journals. He has provided consulting services to Asian Development Bank and various UN agencies. Nir’s paper “Can Blockchain Strengthen IoT?” was the winner of IEEE IT Professional’s Most Popular Paper Award in 2018. In January 2019, his paper ” Blockchain-Enabled E-voting ” was awarded by the 2019 Blockchain Connect Conference as the top eight winners of the Most Influential Blockchain Research Papers. Nir has been quoted/interviewed and/or his work has been featured by hundreds of media outlets worldwide such as Wall Street Journal, Foreign Policy, Scientific American, Bloomberg TV, Public Radio International, CBS News, TV Mundo (Peru), ABF TV (Brazil), Fortune, Time, Christian Science Monitor, SF Gate, Fast Company, Forbes Africa, U.S. News & World Report, New Boston Post, Slate, Observer and Salon. In 2018, he gave a TED Talk about the potential roles of cryptocurrencies in fighting poverty.