Bridging the Gap: How Blockchain Can Unlock Global Financial Inclusion

Over 1.4 billion adults lack access to financial services worldwide, depriving them of opportunities to invest, save, and even pay bills in some cases. These numbers represent individuals navigating life without the financial safety nets most depend on. Blockchain and Web3 technologies are creating pathways to bridge the gap between financial systems and unbanked or underbanked customers.

Challenges in Accessing Traditional Banking Systems

For many, gaining access to conventional banks is simply not feasible, even in nations like the US, where such issues might not be expected. Nearly 23% of those earning less than $25,000 annually are disconnected from financial services. Barriers are widespread globally, influenced by geographical, economic, and social factors. The need for extensive paperwork, high fees, and the requirement to visit physical branches serve as significant hurdles. Maintaining a bank account is often difficult due to minimum balance requirements or monthly fees that lower-income families might struggle to meet.

Entire communities are without the necessary tools for financial security and stability. Additionally, the limited operating hours of many banks clash with the schedules of hourly workers, making access difficult or inconvenient. In developing countries or rural areas, unreliable infrastructure, lack of internet access, and distant branches exacerbate the situation, leaving many without essential services.

Blockchain Solutions Offering New Opportunities

There's immense potential in communities whose financial power remains untapped, with merchants losing out on connections with a large underserved market. Web3 technologies could revolutionize this, offering tools that enable the unbanked and underbanked to engage with financial systems. Blockchain platforms provide decentralized lending and payment options, along with verifiable credit histories.

An example is the L1 blockchain Creditcoin, designed to reach the unbanked, focusing on emerging markets. It recently launched the Ecosystem Investment Program via Credit Labs, valued at $10 million. This initiative aims to foster innovation within the platform's network by offering equity investments between $25,000 and $250,000 to Web3 entrepreneurs, startups, businesses, and developers. The program targets projects that advance Web3 tech adoption, enhance financial access, improve decentralized payment and credit solutions, and apply Creditcoin's blockchain in real-world scenarios.

Creditcoin also supports decentralized internet access through Spacecoin, delivering high-speed satellite connections to underserved areas. Greater access to credit promotes economic growth, enabling businesses to expand and create job opportunities.

Leapfrogging to Advanced Solutions 

In many developing regions, the jump to mobile technology was due to limited funds for infrastructure. The high costs of upgrading and implementing outdated infrastructure led people to bypass traditional communication methods. This demonstrates that lower-income countries can skip older systems and directly adopt modern technology. For instance, landline use is minimal in countries like India, Ghana, and Nigeria, while mobile phone adoption is rapidly increasing.

Blockchain technology, much like mobile tech, can fill the void left by outdated systems. Platforms such as Spectral and Centrifuge utilize this technology to track financial activities, creating transparent credit scores based on blockchain behavior. Decentralized platforms integrate alternative data sources, such as utility payments or mobile phone usage, to determine creditworthiness.

DeFi loans, both collateralized and uncollateralized, present intriguing possibilities. The first type requires users to deposit assets exceeding the loan amount to manage default risks. Jellyverse's jAssets allows users to monitor the value of traditional assets, using crypto as collateral. TrueFi offers uncollateralized loans to reliable borrowers based on their credit and reputation. Community lending pools enable groups to support individuals, reducing default risks. Platforms like MakerDAO employ smart contracts to automate loan processes and collateral management.

Digital platforms facilitate cross-border lending, making credit accessible to those underserved. Lenders and borrowers interact directly, with funds secured in smart contracts until conditions are fulfilled.

Decentralized payment gateways such as Celo focus on smooth cross-border transactions using stablecoins. Web3 companies are also developing user-friendly interfaces for those less tech-savvy, including wallets with fiat on/off ramps for straightforward onboarding. By cutting out intermediaries, Web3 and DeFi platforms can offer lower transaction fees than traditional banks.

Advantages for Blockchain Firms in Serving the Unbanked

Naturally, Web3 and blockchain companies can benefit from catering to populations in developing nations, primarily through long-term profitability. Emerging economies are expected to grow faster than their developed counterparts, with purchasing power and financial activity rising swiftly. The IMF ranked countries based on projected real GDP growth from 2024 to 2025. Many developing nations, including Libya and Sudan, fall into the highest growth category, with GDP predicted to rise by over 13% and 8%, respectively.

Governments in these regions often welcome innovation and may offer favorable regulations or testing environments for blockchain solutions. Blockchain companies entering these markets early can secure a leading position, staying ahead of rivals.

Investors, customers, and partners may view companies focusing on developing regions as socially and environmentally responsible. Blockchain technology has significant potential for environmental sustainability, offering secure solutions for renewable energy trading, tracking carbon emissions, protecting natural resources, and managing waste. Many blockchain projects in these areas align with Environmental, Social, and Governance (ESG) objectives, attracting impact-driven investors.

While Bitcoin is known for its environmental impact, a recent study identified 23 blockchain networks with much lower carbon emissions and energy consumption compared to Bitcoin. Notable eco-friendly blockchains include Fantom and Algorand. Numerous organizations and projects support sustainable blockchain efforts, such as GreenTrust, the Renewable Energy Certificate Mechanism, and the Energy Web Foundation.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.