A combined value of approximately $200 billion is being managed on top of blockchain – a revolutionary technology that has been around for a decade. But until now it has not been used effectively to fix the lack of financial inclusivity that thrives in third world countries and some parts of Asia and Africa.
What if we told you that that situation is about to change?
Microfinancing has been hailed as very successful in enabling the poor to access credit and other financial services. According to a World Bank report, up to 20% of the adult population in Africa and Asia get all their financial services through micro-financing entities.
Micro-financing could, however, do even better with technologies like blockchain. One of the blockchain microfinancing use cases is AssetStream, a P2P lending platform with a global reach to the unbanked and established partners as agents.
How does the AssetStream platform work?
AssetStream, together with its strategic partner ‘CreditOK’ which specializes in credit scoring, will conduct due diligence for both individual and business types of borrower. This allows AssetStream to provide a ‘Credit Rating’ for Small and Mid-sized Enterprises (SMEs) and ‘Credit Scoring’ for the individual borrower.
Credit Rating and Credit Scoring measures the probability of the borrower’s ability to repay both principal and interest. Every punctual payment or fulfilled commitment will immediately affect the credit rating/scoring in a positive way, and vice versa, as the platform promotes the punctuality to the community.
The ‘Credit Rating’ AssetStream provides to ‘PICO Finance’ is very straightforward, as it will happen according to their published financial reports as a financial institution. AssetStream will push forward to ensure the lowest NPL rate as possible and implement CreditOK’s Credit Scoring System (CCSS) and eKYC to ‘Pico Finance’.
The ‘CCSS and eKYC’ process will replace ‘PICO Finance’s’ traditional paper personal-loan form and will indicate an individual measurement which will display the best loan value for the individual.
Another problem the blockchain solves for the micro-financing platform is improved security at a low cost. A report by the accounting firm Deloitte, some financial institutions spend as much as US$100 million annually to protect their data from possible hacking. And still hundreds of millions of dollars are lost annually to hacker attacks.
Last but not least, the blockchain allows for the deployment of smart contracts. These are agreements written in code that self-execute according to predefined conditions. For example, funds locked in escrow as collateral could automatically go to the lender when a condition of defaulting is met. And all this can happen without human intervention.
What does AssetStream get from a conventional banking model?
While blockchain in the banking sector is the future, there are many useful processes in the traditional banking model which AssetStream incorporates in its architecture.
One of these is the ability to meet regulatory requirements. AssetStream achieves the expectations of regulators in countries it operates through partners and agents.
And don’t forget about the ability to enforce obligations in the world of the blockchain. While smart contracts can force performance, it cannot in every aspect. Some performance needs to be forced through the judicial process in specific countries.
What is unique about AssetStream?
The things that make AssetStream stand out include its ability to let borrowers and lenders share value across borders, in a low cost and secure way, while at the same time observing all the laws in the countries it operates.
When to get involved
The AssetStream platform has launched. Head over, sign up now and become one of the first to have the blockchain-based microfinance experience. You can borrow or lend on the platform without crossing geographical borders.