Kiva Fosters New Partnerships to Boost Financial Inclusion via Blockchain Technology

Micro-lending veteran Kiva is continuing its quest to alleviate poverty by expanding its scope to address the global identity gap.  

According to the World Bank, 1.7 billion people are unbanked, and of that total 1 billion of them do not have an official proof of identity. Without the ability to prove their identity, people cannot access basic services like having a mobile phone, enrolling in education or healthcare systems, or participating in local societies, economies and politics. Financial inclusion without discrimination has therefore been identified as a key enabler of the Sustainable Development Goals (SDGs), and registering everyone with a legal identity has become an important target for 2030.

Lack of formal identity, money, and trust for finance providers, along with the inability to verify any credit history, are the main barriers to financial inclusion. To address these issues Kiva has tied up with the UN Capital Development Fund and the UN Development Program to launch the Kiva Protocol, an initiative to help the unbanked get digital identities and protect their own credit information using blockchain technology. The program will enable the secure collection of data to help people access the financial services they need, be it for businesses, education or healthcare services.

As announced at the beginning of the 73rd UN General Assembly by Sierra Leone President Julius Maada Bio, the initiative will launch in Sierra Leone next year. The pilot will implement a nationwide digital identification system over the next three years to widen the country’s financial inclusion landscape. At the moment, 80 percent of the population in Sierra Leone is unbanked and the country only has one credit bureau that holds data of less than 1 percent of its population.

Kiva has been operational in Sierra Leone since 2007 and has distributed over $12 million in loans to its citizens. The organization's experience in the country over the last 11 years, alongside support from the government, was reason Kiva choose Sierra Leone as a starting point.

The Kiva Protocol system will help users receive, manage and repay micro loans issued by Kiva via mobile phone, or through a microfinance institution or field partner working in their community. The data accumulated on the system will be used to establish a credit score for participants. Information will be accessible both online and offline.

The digital identification system that the Kiva Protocol plans to use will be built on blockchain to give people secure and complete ownership of their personal data. No institution or government will be able to access the information without authorization from the owner. Blockchain is a decentralized digital database that can only be updated by consensus between all users, making it near impossible to hack; furthermore, KYC (know your customer) due diligence will need to be done only once, saving the program a tremendous amount of time and money.

Providing formal digital identities as a means to financial inclusion has advantages for both the public and private sector, including increased access to services, increased transparency and efficiency, and the prevention of fraud. Ultimately this could not only reduce poverty in a responsible and sustainable way, but also fuel rapid economic growth. According to a recent report by McKinsey Global Institute, digital finance alone could spur inclusive growth that adds $3.7 trillion to the GDP of emerging economies within a decade. This expansion of financial inclusion could create up to 95 million new jobs across all sectors of the economy.

Both governments and the private sector have a pivotal role to play in propelling financial inclusion for all, urging public-private partnerships to lead the way. Partnerships like that of the Kiva Protocol are catalysts for building a more inclusive society and "fintech" disruptions like blockchain are tools to facilitate it.

Image credit: Kiva. Images are provided by Kiva to advance its mission of connecting people around the world through lending to alleviate poverty.