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Why Could Blockchain Be Useful in Tapping Kenya’s Informal Economy?

Why Could Blockchain Be Useful in Tapping Kenya’s Informal Economy?

Blockchain technology is living up to the expectations of being a disruptive one of the decade. The technology is opening up an informal economy for the financial sectors in Kenya. The size of the informal sector cannot be ignored so easily though it might face some teething issues. Also, the effectiveness of the technology in the country could allow it to be explored in other parts of the world too.

Credit Worthiness

Small businesses like fresh vegetable stall have so far not been able to get the attention of the banks for loans. In fact, banks in Kenya could not resolve the issue of the creditworthiness of traders though the market size of the informal economy is pegged at around $20 billion in the country. The new age technology is being deployed to address the issues concerning the small traders if the banks could find a way to get their creditworthiness.

For instance, a 40-year-old woman is one among several small-scale retailers who could make use of her smartphone to gain access to loans. That would enable her to buy groceries like onions or bananas or tomatoes directly from producers while the delivery would be taken care by Twiga Foods Ltd., a startup firm of the country. As a result, the woman trader, Wacheke, is saved from making a trip to the market.

The procedure allows her to have a positive impact on creating a solid credit track record since it reduces her costs and saves considerable time because there was no need to bargain on prices. Bloomberg quoted her saying that “My prayers have been answered. In business, you need to be fast. The more you pay, the more you get bigger loans, and the more you can sell. It has really helped me.”

Twiga has deployed blockchain technology, which is also used to digital power currencies such as bitcoin, to observe how she manages her business. That included how she is ordering the stock and the habit of repaying. The application focuses on revenue from acquiring fresh wholesale products and then selling it to retailers.

International Business Machines Corp. (IBM) has developed this mobile blockchain platform, and this is one of the increasing numbers of apps that is focused on addressing the lack of finance issue. Obviously, this is one of the big stumbling blocks for the region to grow.

Informal Sector

A Nairobi-based development economist, Anzetse Were, pointed out the neglect in the data of the informal sector, which was suffering from access to credit. He said that there should be a proper strategy for the informal sector if the financial service providers want to break through the African markets.

The size of the small business is a big one in Africa. An International Finance Corporation data suggested that there was a lending gap of about $331 billion in the region. In Kenya alone, there are an estimated demand of $6.5 billion per year from micro, small and medium-sized enterprises. Wayne Hennessy-Barrett, CEO of 4G, indicated that Sub-Saharan Africa thinks that it would take some more time to create the financial structure required for MSMEs.

About the author

Solomon Kingsley

Soloman got involved with Bitcoin while studying his Masters in Finance. Since then, he has been writing blogs relating to the cryptocurrencies and latest news relating to the same. Now he has joined this platform to take his passion a step ahead.

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