According to McKinsey report in 2010, there are 2.0 billion unbanked (population without bank account and access to formal financial services) in the world and in 2016, according to KPMG, only 27% of Southeast Asia’s population have a bank account. Six countries – Myanmar, Cambodia, Laos, Vietnam, Indonesia and Philippines – share 2 common characteristics. Only between 20% to 35% of the population in some of these countries have bank accounts and yet all of these countries have more than 100% mobile penetration. The invention of Bitcoin followed by a myriad of Bitcoin inspired blockchain technologies and smart contract platforms have opened up the possibility for more creative form of grassroots-based inclusive financing solutions that can truly serve the underserved.
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There are 5 elements in addressing the financial inclusion problem. Firstly, there must be a way to create safe and secure store of value, i.e. an account. Secondly, there must a secure and trusted way for funds to be transferred between accounts. Most mobile payment wallet applications are designed to address the first two elements. The next two elements are the ability to borrow without credit history, and the ability to grow their money through savings and investments. The final element is the ability to protect one’s assets through insurance. The key to achieving these goals is driving adoption of technologies that enable these 5 elements and InfoCorp aims to create a financial service delivery mechanism that can unlock financial access for the unbanked.
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To go beyond just a payment wallet, the unbanked must have the ability to manage their own assets. Unlike the assets associated with the more fortunate members of the population who can find jobs in the city and own real-estate, car, bank accounts, investments, the rural population are mainly made up of agricultural microentrepreneurs and smallholder farmers whose only asset could be just a cow, for instance. Blockchain has the ability to provide asset tokenization which means that ownership of illiquid asset can be fractionalized and partially be traded for liquidity. In the case of financial inclusion, a poverty-stricken farmer’s cow can be tokenized and partially sold through crowdsourcing platforms for the public to partake in the sharing of profit derived from the productivity of the cow.
However, this concept can only be fully achievable if livestock provenance for the unbanked can be created. The solution to this involves the ability to uniquely identify livestock, track the chain of custody, and potentially even the lineage of livestock origin through a Livestock Identification Certificate (LIC) managed via blockchain. There is an abundance of blockchain solutions aimed to address food supply chain provenance. But why would the unbanked use it? What incentivizes the livestock owners to provide accurate and traceable data at the last mile?
The key to this is to embed the incentive for livestock identification within the livestock transaction itself. A Livestock Identification Token (LIT) can be created by utilising smart contracts to incentivize the creation of this data for monetization. LIC can be issued by the livestock owner and updated by subsequent owners as part of their blockchain transactions, for instance a payment-versus-delivery transaction to a meat processor. We call both the farmer and meat processor in these example, information producers.
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Overseas importer, large supermarkets, or restaurant chain where the quality and source of livestock origin are crucial parts of their food supply chain quality control process will require this information, which is currently not available in a verifiable state. We call them information consumers. Information consumer pay LIT to obtain the LIC. The LIC contains the history of livestock owners who have contributed data to the livestock ownership history. The LIT can be distributed to the information producers via the smart contract. There will be additional needs such as the use of physical identification devices that can be attached to the livestock and contain the LIC address to facilitate the transfer. For instance, physical devices could be mass-produced passive RFID tags that couple with NFC-enabled smartphones to allow livestock tracking via blockchain addresses. Although, the example above used cow as a reference but is purely symbolic. It can represent any form of livestock where farmers depend their livelihood on. However, cow as compared to other livestock such as goat or pig, has a higher chance of inculcating the value of long term assets to the unbanked. The concept of LIT can not only solve the problem of food supply chain provenance, but can solve the financial inclusion problem enabling livestock asset tokenization as well.
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For financial inclusion to work, technology providers must have a sense of inclusiveness as well as willingness to accept and respect the use of different types of blockchain technologies. The mindset of adopting just “one type of blockchain” is neither practical nor realistic in an inclusive world. Therefore, our future goal is to work with partners to design solutions that can facilitate the inclusion of private blockchains to the public blockchain world, which we called Sentinel. It will be our future roadmap and can further open up the opportunities for non-blockchain based financial services to provide formal financial services to the huge unbanked market leveraging the economies of scale.
 MasterCard Advisors Analysis, 2014