Financial Inclusion Framework
The Stellar Development Foundation and consultants PricewaterhouseCoopers International (PwC) have developed a framework for assessing the effectiveness of blockchain projects in promoting financial inclusion. The framework focuses on four key parameters:
- Access
- Quality
- Trust
- Usage
Assessing Project Effectiveness
The framework proposes a four-phase assessment process:
1. Identify Solution, Target Population, Jurisdiction: Define the problem being addressed, the population affected, and the relevant legal environment.
2. Identify Barriers: Determine the obstacles preventing the target population from accessing financial services.
3. Determine Roadblocks: Use “level charts and guidance” to pinpoint the biggest challenges to onboarding users.
4. Implement Solutions: Prioritize key parameters to make the most effective use of funds.
Proven Effective Solutions
Using this framework, the teams identified two blockchain solutions that have demonstrated effectiveness in promoting financial inclusion:
1. Payments: Blockchain-based payment apps significantly reduce fees compared to traditional financial apps, increasing access for unbanked individuals.
2. Savings: Stablecoin applications allow users to invest in inflation-resistant digital assets, preserving their wealth in countries with high inflation rates.
Stellar Network’s Role
The Stellar network has played a leading role in promoting financial inclusion. It has partnerships with Moneygram and has supported charity organizations distributing aid to Ukrainian refugees.
Criticisms and Considerations
Experts have raised concerns about the use of cryptocurrency in emerging markets, highlighting potential financial risks. It’s important to consider these risks when evaluating blockchain projects for financial inclusion.
FAQ
- What is Financial Inclusion?
- Providing financial services to unbanked people, typically in developing countries.
- What is a Stablecoin?
- A cryptocurrency pegged to a stable asset, such as the US dollar, to reduce volatility.
- What is a Noncustodial Crypto Wallet?
- A crypto wallet where users control their own private keys, unlike custodial wallets where the service provider holds the keys.