Potential of Blockchain for Financial Inclusion in Nigeria

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Saturday May 22 2021 / 08:54 AM / by EFInA / Header Image Credit:  EFInA 

 

What is Blockchain

Blockchain is a type of database that stores information or data in a structured and decentralized way. It is an electronic ledger system that creates a cryptographically secure and immutable record of any transaction of value.

 

Key Features of Blockchain

Distributed ledger

Every participant in the network has simultaneous access to a view of the information

 

Consensus

Peer-to-peer verification replaces the need for a third party to authorise transactions

 

Cryptography

Cryptographic functions ensure integrity and security of the information on the blockchain

 

Smart contracts

Additional business logic implies that agreements on the expected behaviour of financial instruments can be embedded

 

How Transactions on Blockchain Occur

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Key Benefits of Blockchain

  •  Increased transparency and traceability
  • Data is immutable and reliable, and information is transparent
  • Enables decentralised systems for peer-to-peer activities
  • Reduces transaction costs due to elimination of intermediaries
  • Promotes dynamic pricing
  • Enables effective monitoring and compliance of transactions

 

Blockchain has the potential to boost global GDP by $1.76 trillion by 2030

Blockchain has the potential to boost global GDP by USD 1.76 trillion by 2030. This is according to a PwC research report that assessed how blockchain is currently being used across industries. This report also identified 5 areas with the most potential; these are Source Verification (USD 962bn), Payments and Financial Instruments (USD 433bn), Identity (USD 224bn), Contracts and Dispute Resolution (USD 73bn) and Customer Engagements (USD 54bn).

 

There is an opportunity for the global financial services sector to gain USD 380bn in revenue annually on the back of including the unbanked and underserved.3 71% (USD 270bn) of this amount is attributed to closing the MSME credit gap. Blockchain has the potential to drive access to finance for MSMEs, to achieve this target and potentially generate revenue for the financial services sector.

 

Blockchain also has the potential to generate about USD 110bn simply by including unbanked adults into the formal financial system and raising their financial services spending levels.3 Person-to-person payment solutions that ride on blockchain technology and augmented by an agency network can facilitate low cost and fast transaction services, especially for the bottom of the pyramid.

 

Blockchain could increase Nigeria's GDP by $29 billion by 2030, about 3% of total estimated GDP by 2030

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There are four key areas in which blockchain can be deployed to improve financial inclusion

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Beyond financial inclusion, blockchain can help Nigeria achieve its developmental goals as enshrined in the SDGs (Sustainable Development Goals)

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The foregoing depends on the activities / roles of select critical stakeholders as highlighted below

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Learning from other Countries - Countries have implemented similar initiatives in the past with quantifiable benefits

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