A Summary Of The Status Of Financial Inclusion
All people worldwide have access to essential financial services, regardless of their income, social status, or demography – this is what Financial Inclusion literally means.
The COVID-19 outbreak has highlighted the importance of financial inclusion. The 2019 pandemic has affected many around the world, especially low-income communities. Access to proper financial services is necessary for these people to access essential financial resources to start businesses or pay for food and healthcare.
“Financial inclusion is the state where people can access various financial services. The services list includes savings, credit, loans, insurance, and payments. This inclusion allows individuals and businesses to save & transfer money and assets and invest in their future. Further, this is essential for economic growth and development. However, there are still millions globally who are financially excluded. This is due to numerous factors, including poverty, lack of education, and discrimination.”
How Could Crypto Exchanges Impact This?
Crypto exchanges can play a role in promoting financial inclusion. Facilitating the buy, sell, and trade of cryptos, they are more accessible than traditional banks, as they do not require users to have a credit history or a minimum balance. This makes them a viable option for people who are unbanked or underbanked.
1. Low Entry Barriers
Cryptos generally have low restrictions and can be accessed by most individuals and businesses because they do not demand a credit history, unlike traditional financial services.
With minimal Know Your Customer requirements, crypto exchanges can allow unbanked communities to become a part of the global financial system. The only requirements are an internet connection, a device, and some funds.
Besides, exchange platforms make financial transactions more affordable. Businesses can do cross-border transactions without depending on intermediaries or remittance services.
2. Decentralized Nature
Cryptocurrencies follow the most critical trait of blockchain – decentralization. It means that no central authority or entity can control the flow completely. This makes them more accessible to people in countries with unstable financial systems.
Anyone with an internet connection and a digital wallet can access decentralized financial systems. This makes financial services available to individuals in remote areas lacking traditional banking infrastructure. Also, decentralization supports P2P lending and borrowing of assets, thereby eliminating the need for mediators.
3. Cross-Border Transactions
Cryptos make cross-border transactions quick and cheap. This is a huge advantage for people in countries with high remittance costs, like El Salvador.
Cross-border transactions allow individuals and businesses to tap into global markets. This leads to investment, trade, and business expansion opportunities, particularly for developing economies, ultimately improving financial inclusion.
Cryptos can mitigate currency exchange risks because they are not tied to a specific country or currency. This stability can significantly benefit people in regions with unstable local currencies.
4. Access To Credit
Many crypto exchange platforms offer peer-to-peer lending and borrowing services. This provides access to credit for people who cannot get loans from traditional banks due to their poor credit scores or lousy account history.
5. Banking The Unbanked
Ultimately, cryptos can empower the unbanked by allowing them to store and transfer value without needing a bank account, only if the government and private sector of the country allow it.
Conclusion
Of course, there are challenges and risks for the mainstream adoption of crypto exchanges. They include market volatility, regulations, security-related problems, etc.
Despite this, the potential benefits of using crypto exchanges for financial inclusion are significant. Crypto exchanges can help reduce the cost of financial transactions, increase access to credit, and provide a store of value for people in countries with unstable economies.
Examples – How Are Companies Using Crypto Exchanges To Contribute Towards Financial Inclusion
- Africa – BitPesa
- provides remittance services
- secure and cheap
- India – Zebpay
- P2P lending, crypto trading, & educational resources
- focuses on banking the unbanked
- Latin America – Buda.com
- loans to people rejected by banks
- P2P lending and borrowing services
