Kiva, a San-Francisco-based non-profit, is introducing an online ID database in Sierra Leone that uses blockchain technology to track credit history. The platform was launched by Kiva and Sierra Leonean President Julius Maada Bio on August 21 in Freetown, the country’s capital.
It’s hoped the initiative will enable Sierra Leone’s citizens to secure loans, establish credit histories and gain access to financial services.
The platform works by giving each prospective borrower a digital wallet. Their transactions are recorded on a blockchain ledger, which ensures user information is secure and can’t be tampered with
More than three quarters of Sierra Leone’s seven million citizens are excluded from the formal banking sector, due to the West African country’s standing as one of the poorest in the world. The use of informal financial institutions like community banks is therefore common in the country. However, these projects have no way of establishing the identity or credit history of borrowers, and therefore tend to offer loans with very high interest rates to minimise lender risk.
Kiva is a non-profit that aims to increase financial inclusion around the world. It has deployed a total of $1.3bn in loans across almost 80 countries. This will be the first time the company has implemented an online credit system.
The platform works by giving each prospective borrower a digital wallet. Their transactions are recorded on a blockchain ledger, which ensures user information is secure and can’t be tampered with. Lenders will then be able to access citizens’ credit histories by using fingerprints and other biometric data previously collected by the Sierra Leonean Government.
A potential flaw in the platform is that the wallet can only be accessed through an online app, even though the majority of Sierra Leoneans have limited access to the internet. However, Kiva plans for users to get around this by using MiFi devices that can connect to the internet via phone networks.
Sierra Leone’s government aims to have all banks and microfinance institutions set up with the system by the end of the year. As one of the poorest countries in the world, Sierra Leone has a pressing need for improved financial inclusion within the global economy. With greater access to financial services, its population will be able to improve its ability to claim a stake in the digital economy.