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The Simple Formula for Financial Inclusion

Financial inclusion is a phrase that is thrown around a lot in the financial services industry, but not many people know what it means. Financial inclusion is defined as the ability of individuals to access the financial services they need, such as saving money, borrowing for a home or business, and investing for the future. While most of the developed world has financial inclusion, millions of people in the developing world do not.

Cryptocurrency has been the center of the world’s financial conversation for more than a year, but in the past 12 months, we’ve seen a growing divide between the “haves” and the “have nots.” Wealthier people have been able to take advantage of cryptocurrency investments to make a profit, while those of lesser means have been left out of the conversation. That’s why we’re changing the game. (WoyagerToken) is the first cryptocurrency built specifically to address the needs of the financially excluded, and it’s going to change cryptocurrency forever.

Only 37% of people in the United States own cryptocurrency. That means that for every 100 people you meet, only 63 of them own cryptocurrency like Bitcoin and Ethereum that can be traded in for cash. Many people, especially older generations, believe that this is because they do not understand the process of how to buy, trade, and cash out cryptocurrency. But the truth is, it’s not difficult. Blog Post: The most common way that people get cryptocurrency is by buying it on an exchange with US dollars or other fiat currencies. Sometimes, the exchange will have a minimum amount that you must trade, but this is usually around $500. These exchanges will charge you a small fee and that fee will be deducted from your purchase. Blog

Financial inclusion is one of the most important topics in blockchain, because we have a unique opportunity to do something about it. Financial inclusion is a big problem, so I’m going to simplify it into a few understandable examples, and then show how blockchain technology can solve it. And most importantly, I’ll show you why you should care. The Simple Formula for Financial Inclusion

History of Zawadi

Zawadi is a mother from Kenya living in a remote village. She needs money to buy food for her family, but it takes her all day to get to the nearest bank. Today she sends a simple text message to transfer money to a local cop who meets her in town and hands her physical money, just like a human ATM. This is the magic of M-Pesa, a mobile money system launched in 2007 by Safaricom, Kenya’s largest mobile operator. It is similar to Venmo, but there is an important difference: You do not need a bank account. M-Pesa users can exchange electronic money and real money with the help of local agents – local shopkeepers or entrepreneurs who are licensed to issue and receive cash (they receive a small fee for their services). Think of them as human banks in places where there are no banks. It was a service that Kenya desperately needed: Only five years after implementation, 83% of Kenyan adults were using M-Pesa (see HBS’s excellent case study on implementation). It was a solution that included technology and people to serve non-bank customers. Ten years after its establishment, Kenya has become one of the fastest growing economies in sub-Saharan Africa, according to the World Bank. More equal access to money has a variety of second-order effects, including more equal access to education, health care, and a better quality of life. The convenience of M-Pesa has allowed Zawadi to spend his time on more useful activities, such as. For example, learning new skills or teaching their children instead of spending a day or two at the bank. This is the goal of financial inclusion. The Simple Formula for Financial Inclusion

Carla’s story

Carla is a homeless woman in Amsterdam who had a particularly hard time during the pandemic. Mostly she slept on the couches of friends and acquaintances, sometimes she slept in local homeless shelters, always in fear of contracting COVID-19. Carla lives on cash and often begs for her daily needs. In the middle of the pandemic, no one wanted to reach into their pockets or touch anyone else, which meant that some days she was even hungrier than usual. The contactless Helping Heart vest is a social experiment developed by advertising agency N=5 that allows people to donate to Carla by holding their phone up to her vest. Money can only be exchanged for food and other necessities at the local shelter. The technology also allows Carla to set aside a small portion of each donation so she can build a more stable future. Your HELP jacket is a mobile bank account – literally! It’s a way of using technology and people to help customers without a bank. This is the goal of financial inclusion. The Simple Formula for Financial Inclusion

History of Siddharth

Siddharth is a farmer in Kalahandi, India. His life is difficult because he only has a small piece of land, so it is difficult to achieve a scale effect. The monsoon season in India is unpredictable: too much or too little water and the harvest fails. Even in a good year, he has to market and sell his crops in a country where half of the 1.3 billion people are also farmers. He is not alone in his struggle: In India, poverty is so widespread that the government has long been looking for ways to address the welfare state. After decades of wastage, the country has invested in a visionary project called India Stack to address the difficult issues of money and identity. Think of India Stack as an open source digital infrastructure (a set of open APIs) that is accessible to everyone:

  • Unique digital identification based on fingerprint and eye scan;
  • A paperless layer where digital documents can move with a person;
  • A cashless phase where money can be moved between digital wallets;
  • A level of agreement where you only share what you want to share.

Siddharth can now easily get government subsidies for his small farm: He scans his fingerprints at a local bank to confirm it’s him. The money is sent to his digital wallet, eliminating the need for paper checks, reducing the amount of money lost to middlemen and corruption, and allowing him to get the financial help he needs. Since the launch of the first part of India Stack in 2009, the country’s economy has grown significantly. From 2014 to 2018, India was the fastest growing economy in the world, surpassing even China. Again, India Stack is a way of using technology and people to give Siddharth access to the money and easily confirm his identity so that he can get the money. Everyone benefits. This is the goal of financial inclusion. Let’s call this the Godefroy formula. (Watch the video here). The Simple Formula for Financial Inclusion

A simple formula for financial inclusion

Jean-Michel Godefroy is the former director of the European Central Bank, the financial centre of the European Union. It would be very simplistic to say that he created the euro, but he worked on it for 16 years:

  • Initially, he was involved in the development of payment systems for the euro;
  • He then became responsible for the monetary policy of the euro;
  • He then led the team that developed the euro clearing systems;
  • He then led the team that completely rebuilt the payment rails for the euro.

In a way, this is how he created the euro. I was pleased to hear Godefroy speak about financial inclusion this week. While he acknowledged that this is an important and difficult problem, he gave a simple formula for how blockchain can help solve it: Central bank Digital currencies + digital wallets = financial inclusion Digital currencies from central banks (or CBDCs) simply mean that every government will eventually issue its own cryptocurrency. So the US gets a digital dollar, the EU a digital euro, and so on. They will function as the stable currencies of today, but with full participation of the federal government. Digital wallets are usually accessed through a computer or mobile phone (not necessarily a smartphone), as in the examples above. When you think of digital wallets, think of everything in your wallet: Identification, credit cards and cash. The good news is that there are about 5.6 billion adults on planet Earth and over 5 billion cell phones. We’re almost there. In Godeffroy’s formula, with government-backed digital currencies and digital wallets on people’s phones, we can solve the difficult problem of financial inclusion by bringing money to anyone with a mobile device, even those without a traditional bank account. Technology + people = accessibility. Plus, it’s a rhyme. Improving our financial systems is like improving our roads. The Simple Formula for Financial Inclusion

Why financial inclusion is good for you

Many people do not have easy access to money or credit. What do you care? Imagine a run-down neighborhood in the middle of your city. When you go to town, it gets a little confusing. There’s graffiti and broken windows. Some streetlights are broken, so people don’t go there when it’s dark. And above all, the roads are rotten. The city is investing a lot of money in the area: The roads are well maintained, the trees are healthy. So over time, people move to the suburbs. After that the shopkeepers nailed up their facades and let the inner city degenerate and fall into disrepair. Over time, this economic depression spread like a fungus beyond the city center. Finally, suburban home prices are falling and the overall quality of life is declining. Imagine a new government with a plan to revitalize the downtown area. They offer tax incentives to encourage new businesses, invest in education programs to attract new workers. And most of all, they fix the roads. If the roads improve, people will start driving in the city again. It became a busy thoroughfare, and business followed traffic. In the next ten years, the inner city will be transformed into a thriving metropolis. Real estate prices are skyrocketing. The restaurants are getting better and better. The city centre is going to change. It happens all the time: That’s called gentrification. And in this simple example, it all starts with the infrastructure: Road repairs. Now imagine that instead of roads, they are financial systems. Downtown residents are like people without bank accounts: While the rich get richer and move to the suburbs (i.e. they have access to money and credit), the poor get poorer and are stuck in the inner city, which is slowly becoming a ghetto. Improved streets bring new traffic, which brings more prosperity, which makes the downtown thrive and which we can all enjoy. Similarly, improved financial channels – in the form of CBDCs and digital wallets – are creating a new flow of money that brings greater prosperity, improving the quality of life for all – in ways that surprise and delight. Everything is connected. It’s not just about getting homeless people back on their feet instead of living under a bridge. It’s not just about a single mother with four children being able to get a loan instead of waiting in line at the food bank. The idea is that these people can be more productive, have higher self-esteem and contribute more to the overall well-being. Financial inclusion – improving our financial paths – improves the quality of life for everyone, including you. When the poor benefit, others benefit. The Simple Formula for Financial Inclusion

Why financial inclusion makes for better government

Some people are put off by the idea of public assistance and think that financial inclusion means a welfare state where people have no incentive to work. Therefore, this financial inclusion will lead to better governance: Blockchain is a programmable currency. Think of CBDCs that can only be used to buy certain things, like food stamps that can only be used to buy food. Imagine if COVID-19 benefit checks could only be used for basic necessities and not gambling or Dogecoin. With programmable digital money, it’s possible. As India Stack has shown, programmable currency can be used to eliminate corruption and middlemen and ensure that the money needed to meet demand goes directly into the digital wallets of those who need it. It makes for safer and better government, more efficient use of your tax dollars. It is expensive for governments to serve the poor, who often do not have bank accounts and do not know what to do with the money when they receive it. CBDCs and digital wallets are a solution that everyone can get behind: Conservatives, Liberals and everyone in between. As investors in blockchain, we are helping to make this transition possible. Every time we introduce someone to digital currency, we increase the pressure on governments to take the CBDC seriously. Every time we create a digital wallet, we increase the pressure on banks to switch to cryptocurrencies. Every time you share this article with someone, you help spread the word. CBDCs are coming. Digital portfolios are already there. This is what it comes down to: financial inclusion.While Bitcoin is considered a revolutionary new digital currency, there are many more uses that people can enjoy when they understand the basics of blockchain technology. Woyager started by creating a cryptocurrency, but the same technology can be used to create digital IDs, smart contracts, digital property, and many other exciting new features. (For more information, check out our guide to blockchain technology.). Read more about measuring financial inclusion: a composite fi index for the developing countries and let us know what you think.

Frequently Asked Questions

How is financial inclusion calculated?

The largest cryptocurrency exchange, Binance, has just released the second version of their financial inclusion index. This measurement looks at the number of people who have a bank account, compared to the number of people who used cryptocurrency. The index looks at the percentage of the population worldwide that use cryptocurrency, and compares that to the percentage of the world’s population that has a bank account. While the percentage of people using cryptocurrency is only 3.5% (although that number is rapidly growing), the percentage of the world’s population with a bank account is still very high, with 91.5% of people worldwide having a bank account. How is financial inclusion calculated? In order to calculate the financial inclusion of a country, one generally uses a formula that encompasses various aspects of banking, the number of bank branches, the number of bank accounts, and access to financial services. While that might sound complicated, it is actually a very simple formula.

What are the variables of financial inclusion?

Financial inclusion is the degree to which individuals and businesses have access to affordable financial services, and use them regularly. It is not a new phenomenon, but one that has been a long time coming. To give a very basic example, if you’re a farmer in rural Indonesia, you may not have access to a bank account, or basic savings tools, but if you have a mobile phone, you can have access to a variety of payment methods, such as bitcoin, or even the new woyagertoken. When it comes to financial health, the more money you have, the better off you will be. This fundamental concept is often overlooked when people consider the often neglected world of cryptocurrency. In this article, we are going to explore the idea of financial health and how cryptocurrency can play a part in helping you achieve financial health.

How do you create a financial inclusion index?

As you might have heard, I’ve designed a new index that measures the level of financial inclusion around the world. I’ve named it the Woyager Financial Inclusion Index, for obvious reasons. The index will start off at 100 for each country, with 0% financial inclusion in the country with the lowest level, and 100% financial inclusion in the country with the highest level. With time, as financial inclusion increases in the world, all countries will approach 100% financial inclusion. How do you create a financial inclusion index? If you search online, you’ll find many different ideas about how to create an index, but they all boil down to four main components. You’ll need a list of financial service providers, the geographical areas that they operate in, a way to measure each area’s financial inclusion, and a list of the areas that have been included in the index.

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