Kiva, a non-profit organization that endeavors to expand financial access to underserved communities around the world, has turned to blockchain technology to create an identity database in Sierra Leone that will allow people who struggle to get loans to prove their credit history. The system, launched by Kiva and Sierra Leone President Julius Maada Bio in the capital Freetown Wednesday, aims to use the technology to bring more Sierra Leoneans into the financial system and promises a different route to the likes of Facebook in their attempt to ‘bank the unbanked’ with Libra.
— Crypto Femi factor ???? (@5emifactor) August 22, 2019
Biometric Data to be Used in Conjunction with Blockchain
Although Kiva already facilitates small loans to residents of 80 countries, Sierra Leone is the first to implement an online credit system designed by the startup, which has been operating since 2005. President Bio acknowledged the “visionary step” during the launch, stating that the platform “guarantees that Sierra Leoneans are not excluded from…the global digital economy.” Data from the Sierra Leone Central Bank suggests that more than three quarters of Sierra Leone’s population lies outside the formal banking sector, and while informal institutions like community banks and microfinance lenders are more common, they rarely share credit information and often charge extortionate interest rates. Kiva will allow lenders to look up citizens’ credit histories using fingerprint and other biometric data collected by the Sierra Leone’s government as part of the effort to print voter ID cards.
A Real Solution to a Real Problem
Prospective borrowers will be assigned a digital wallet which they will access through a smartphone app, with transactions recorded on the blockchain in order to keep user information secure and prevent tampering. However, with less than 15% of Sierra Leoneans having access to the internet, rollout could be severely restricted, although Kiva hopes that partners in the field, including banks, can help overcome this by using ‘mi-fi’ devices, which connect to the internet via phone networks which are much more widespread than internet services. The government aims to have the system in place for use with all banks and microfinance institutions in the country by the end of 2019, ushering in a new era of blockchain adoption that could really make a difference to the lives of thousands of people. Sierra Leone has already experimented with blockchain for use in tracking diamonds mined in the country to ensure authenticity and track their movements.