Could the latest financial inclusion framework be a game-changer in assessing blockchain projects targeting emerging markets? This framework, a collaboration between the Stellar Development Foundation and PricewaterhouseCoopers International (PwC), was recently unveiled in a white paper. The objective of this framework is to establish a standard for evaluating the impact and effectiveness of blockchain solutions in improving financial access.
Understanding the Financial Inclusion Framework
At the core of this financial inclusion framework are four key parameters: access, quality, trust, and usage. Each parameter is further dissected into sub-parameters. For instance, the ‘access’ parameter is evaluated based on affordability, connectivity, and ease of initiation. To measure these sub-parameters, specific metrics are proposed. The ‘connectivity’ sub-parameter, for example, can be gauged by the number of cash-in/cash-out locations within a relevant target population region.
The Four-Phase Assessment Process
The framework also introduces a four-phase assessment process to address financial inclusion challenges. The first phase involves identifying a solution, target population, and relevant jurisdiction. In the second phase, obstacles preventing the target population from accessing financial services are identified. The third phase utilizes ‘level charts and guidance’ to pinpoint the most significant barriers to user onboarding. Finally, in the fourth phase, solutions that ‘prioritize key parameters’ are implemented to maximize the effective use of funds.
Proven Blockchain Solutions for Financial Inclusion
Utilizing this financial inclusion framework, Stellar and PwC have identified two blockchain solutions that have successfully enhanced financial inclusion. The first is the use of blockchain for payments. Traditional financial apps usually charge between 2.7-3.5% for money transfers between the US and the studied market. In contrast, blockchain-based solutions charge 1% or less, based on a study of 12 applications operating in Colombia, Argentina, Kenya, and the Philippines.
The second solution is savings. In Argentina, a stablecoin application allows users to invest in an inflation-resistant digital asset, thereby preserving their wealth in an otherwise volatile economy.
Stellar, a key player in promoting payment inclusion in underserved financial markets, announced a partnership with Moneygram in September. This collaboration aims to produce a non-custodial crypto wallet that can be used in over 180 countries. However, the use of cryptocurrency in emerging markets has been met with criticism, with some experts arguing that it has ‘amplified financial risks’.
Monitoring the performance and impact of blockchain projects in emerging markets can be a challenging task. However, with the help of tools like the financial inclusion framework and platforms like cryptoview.io, the assessment process can become more systematic and accurate.
