Blockchain Technology Set to Bank the Unbanked in Developing Economies
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Developing economies have lagged for many years as a result of limited access to financial services. Most of these countries are bank-based markets where businesses and individual investors rely on loan facilities to bootstrap their operations. However, the same banks have been major points of failure, given the hurdles that prospective loan borrowers have to face before accessing financial services.

With banks at the centre of developing economies, financial inclusion rates remain lower than market-based economies such as the US The latter ecosystem allows investors and innovators to interact through stock markets, hence fueling financial inclusion. On the contrary, developing bank-based economies are yet to achieve the desired levels of financial inclusion.

Shortcomings of Banking Ecosystems in Developing Economies

The banking infrastructure in developing economies faces multiple challenges, which range from systemic to unsystematic factors. As it stands, some of the least financially included countries come from Africa, with the continent representing close to 60% of the world’s total unbanked population.

So, why is it hard for citizens in these countries to access financial services? One of the obvious reasons is a cumbersome KYC process by financial institutions. While due diligence is a standard operation for financial intermediaries, requirements to open a bank account in developing economies often overwhelm prospects. In some cases, the natives lack essential identification documents or certificates such as tax compliance, making it hard for financial service providers to onboard them.

Another reason is limited financial service providers in remote regions where a significant population of developing countries reside. Most financial institutions in a continent like Africa have set up offices in major cities and towns while giving minimum attention to the rural folk. Farmers and other professions residing in remote regions often opt for informal or semi-formal savings initiatives instead of relying on the banking ecosystem.

Given these shortcomings, it comes as no surprise that developing countries are still struggling with financial inclusion. The situation goes on to affect other sectors which rely on loans to kickstart or sustain operations. Ideally, the ripple effect is felt across all industries in developing economies.

Banking the Unbanked

With financial inclusion being identified as an enabler of 7 of the 17 Sustainable Development Goals, the United Nations has embarked on a campaign to enable more people to access financial services. So far, there appears to be significant progress with developing countries pivoting towards mobile money services. The latest Findex data shows that adults in developing countries who access financial services through a mobile money service rose from 54% to 64% between 2014 and 2017.

The prospects of financial inclusion in these countries have further improved following the debut of blockchain technology and cryptocurrencies. This upcoming financial market niche aims to decentralize financial services by making them accessible to anyone regardless of their location. In addition, crypto ecosystems eliminate the need for KYC requirements, enabling users to leverage their gadgets as ID and proof of address.

That said, some crypto innovations are going to the extent of featuring various financial services. One example of such an ecosystem is the protocol built on the YottaChain public blockchain. Just like traditional banks, allows users to lend and borrow crypto assets within its network. In addition, they can also access staking, which is basically dedicating your tokens to support the blockchain’s operations in return for governance token rewards.

It is quite noteworthy that blockchain-built projects like also introduce guaranteed security. The protocol relies on audited smart contracts for execution, removing the need for financial institutions. With such innovations coming up, developing economies have a bigger opportunity to be financially included.

A Relief For Developing Economies

For a long time, developing economies have been sidelined when it comes to financial inclusion. The narrative is now changing with the debut of mobile money services and the crypto ecosystem. Decentralized finance products can be accessed by everyone across the globe as long as they have an electronic device and a digital wallet.

Though still a young market, the DeFi ecosystem offers better opportunities and a seamless way to be integrated into the financial world. Some of the loan facilities provided by DeFi protocols are more lucrative and flexible compared to what traditional banks offer.

Going by the current trends, developing countries are likely to adopt decentralized markets. This is already evident in crypto adoption rates, where countries such as Nigeria and Kenya are among the pack leaders.


The banking ecosystem is gradually outliving its value proposition as the world moves to decentralization. This industry is already being challenged by nascent innovations, although it appears to have some ammunition left. That said, it may take some time before we see a complete overhaul of the financial ecosystem, but the chances increase daily.

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