Blockchain Technology Disrupts the Informal Economy in Kenya


Kenya is one of the African nations in dire need of financial reform. Introducing such changes will require embracing new technologies. Blockchain will certainly play its role in this regard. The nation’s informal economy – valued at $20 billion – can certainly benefit from immutable ledgers.

The Informal Economy in Kenya

African nations are very interesting creatures when it comes to finance. On the surface, it seems a region most Western banks will not show much interest in. For local financial institutions, a whole set of new problems have arisen over the years. Financial inclusion is still one of the bigger concerns in Kenya, as well as other countries around the world.

Secondly, the country is home to a growing informal economy. To put this into perspective, thousands of small-scale retailers exist in African regions. However, they use slightly different methods of accessing loans, buying goods, and so forth.  As such, they are ineligible for official credit ratings, even though the industry has grown to a value of over $20 billion annually.

Solving such a glaring problem will not be easy. For these smaller entrepreneurs, cutting costs and building a credit track record is a key challenge. Forging new partnerships with suppliers and financial service providers is problematic. While there is a genuine open-mindedness toward extending these services to small businesses, not every entrepreneur is on a level playing field.

The Introduction of Blockchain Solutions

It does appear one type of technology can solve all of these problems in the coming years. Blockchain technology allows businesses to evolve and build up immutable records. In a world without official credit-scoring, such a transparent ledger offers many benefits as well. Twiga, a startup in Kenya, is already taking the plunge in this regard.

The startup relies on blockchain for its day-to-day operations. The company specializes in buying wholesale fresh produce and selling it to small entrepreneurs. With blockchain technology, the company monitors orders, supplies, and repayment habits. It has the potential of bringing the informal sector to the forefront in Kenya moving forward.

Whether or not this venture can close the lending gap, is a different matter altogether. Small and micro-sized businesses direly need loans in Kenya and other African nations. Accessing this type of finance is proving to be extremely difficult these days. Without newer infrastructures, such as blockchain-based services changing that situation will prove to be extremely difficult. Even so, distributed ledgers are changing the way finance is conducted in Sub-Saharan Africa.



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