By Hirander Misra, Chairman of GMEX Group & MINDEX Holdings and Co-Chairman FinComEco
The 8th – 10th May AFSIC Investing in Africa conference had financial inclusion through the use of blockchain high on the agenda.
A panel discussion entitled “The Rise of Blockchain Solutions and Impactful Finance”, which I was fortunate to participate in along with other industry experts, resulted in the following key takeaways:
Growth constraints: Agriculture is indeed a huge market in Africa: 700 million Africans are farmers. Yet, Africa is a net food importer, with its annual bill being USD35 billion and estimates pegging it at USD110 billion by 2025. In this vast continent of over 30 million km2, poor management of land resources, coupled with inefficient banking practices bound in red tape, hinders economic growth and leaves most farmers marginalised.
Lack of financial infrastructure: The lack of access to services that developed countries would take for granted sees millions of Africans unsupported when it comes to financial infrastructure. Loans, credit lines and savings accounts are some of the opportunities which remain unavailable to many. The current financial system has made individuals reliant on many middlemen.
Blockchain powers impactful finance: Blockchain has two major advantages for banks – it enables them to save money by streamlining and also speeds up transactions. Lower costs and greater coverage through use of new technologies such as blockchain via initiatives such as FinComEco will enable unbanked smallholder farmers in sub-Saharan Africa to feed their families by providing transaction security, eliminating corruption, reducing borrowing costs, and ensuring liquidity for the purchase of inputs by guaranteeing the sale of produce. In the case of the ACE agricultural commodity exchange in Malawi, introducing prices on the mobile phones of farmers and making the banks compete online to lend, coupled with making the exchange more accessible so they could sell their produce directly, saw 47,000 smallholder farmers’ incomes go up 31% with USD10 million of finance provided.
AI to complement blockchain: Blockchain and artificial intelligence are increasingly likely to complement each other as some of the technological constraints are eliminated. As the IOT (internet of things) is setting us up for a revolution of connectivity, the advent of decentralised blockchain and centralised artificial intelligence could result in a huge positive social impact and financial inclusion in emerging economies.
All in all, the rise of new technologically-enabled structures promises to shake up the status quo, at just the right time.