The Context

  • UN Sustainable Development Goal 1 calls for the eradication of all forms of poverty before 2030 (United Nations, 2021). The world is currently not on track to meet this goal. According to the World Bank (2021), one out of ten people in 2020 (about 9.2% of the world) are considered to live in extreme poverty, living on less than $ 1.90 a day, a setback caused in part by the global COVID-19 pandemic. Of which, according to the World Bank, 87% of the world’s poorest are living in Sub-Saharan Africa, representing more than 480 million individuals. The current energy and food crisis is likely to lead to further setbacks (United Nations, 2022; World Bank, 2022).

  • The World Bank considers financial inclusion a key enabler to reduce extreme poverty and boost shared prosperity. “Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit, and insurance – delivered in a responsible and sustainable way.” Since financial inclusion has been identified as an enabler for 7 of the 17 Sustainable Development Goals, a rapid rise in digital finance provides opportunities for access to financial services, including UBI, to communities all over the world, including those in low and middle-income countries (World Bank, 2021). However, little is known about the impact of digital finance and its potential to reach vulnerable communities. Recent evidence shows that the implementation of cash transfer programs using mobile money transfers has many positive effects: extreme poverty reduction, consumption in rural communities, diet diversity, etc. (Aker et al., 2016; Lee et al., 2021). But despite this positive evidence, there still exist open questions on how to make financial inclusion actually reach all of those communities around the world that need it (Aziz & Naima, 2021; Lashitew et al., 2019).

  • The COVID-19 pandemic made a compelling case for digital aid delivery. This can play a critical role for governments/multilaterals to deliver social assistance quickly and safely. Digital Infrastructure not only allowed governments to reach an unprecedented number of new beneficiaries, it also allowed them to make payments to them remotely. This brought millions of people into the social protection and financial system for the first time (World Bank, 2022). However, it also highlighted the need to expand digital infrastructure with the goal of making payment systems more inclusive, effective, and sustainable. This includes addressing the challenges faced especially by women, who are often digitally and financially excluded. 1.4 billion adults remain unbanked.  These people are hardest to reach – and more commonly women, poorer, less educated, and living in rural areas. 

  • The Global Findex 2021 finds that almost two-thirds of adults in developing economies who received digital payments also used their accounts to store money for cash management, about 40% used their accounts to save, and 40% used their accounts to borrow. Although the data cannot establish a causal relationship, these findings suggest that digital inflows can pave the way for the wider use of financial services. Cash transfers are widespread: 97% of LMICs, 77% of which use unconditional CTs (World Bank, 2017), but the costs of delivering a cash program can be non-trivial. According to the International Rescue Committee, unconditional cash transfer programs’ costs range from 14 cents for every dollar transferred up to $1.32 for every dollar transferred.

  • The provision of universal basic income (UBI) has the potential to combat extreme poverty. “Basic Income consists of a periodic cash allowance given to all citizens without means, to provide them with a standard of living above the poverty line” (Stanford Basic Income Lab, 2022). A recent synthesis of UBI research has shown that UBI interventions can have positive effects on poverty alleviation, health, and education outcomes. Evidence of positive impact is seen on work conditions, while effects on labor market participation are insignificant (Hasdell, 2020). However, channels of cash assistance prove to fall prey to corruption and high expenses. Lack of transparency, plethora of intermediaries, and potential for corruption further increase the cost of aid via cash assistance. While estimates vary greatly the UN reports that 30% of aid is lost to corruption; the World Bank estimated the cost of corruption around $2.6 trillion, or 5% of global GDP – this figure encompasses both domestic and foreign corruption. However, this figure includes corruption in various sectors beyond foreign aid.

impactMarket’s aims to achieve these goals:

  1. Financial Inclusion: Many people in poverty lack access to traditional banking services. impactMarket’s financial tools provide them with access to basic financial services such as remittances, and low-cost money transfers in addition to specialized features enabled by the use of blockchain, like rewarded financial education, basic income, and an on-chain credit score. Moreover, utilizing stable coins, cryptocurrency, and community tokens enables peer-to-peer transactions without the need for intermediaries like banks, making financial services more accessible and affordable.

  2. Transparency and Trust: Poverty-stricken individuals often face issues with corruption, fraud, and lack of transparency in financial transactions, as well as a lack of control over predatory transaction fees. Blockchain's decentralized and immutable nature can help establish trust and transparency in financial systems and newer currencies/tenders. By recording transactions on a distributed ledger that is visible to all participants, blockchain reduces the possibility of fraudulent activities, ensuring that funds reach their intended recipients and are used for the intended purposes, in impactMarket’s case: utmost freedom in spending decisions.

  3. Cost Reduction: Traditional financial systems involve numerous intermediaries and high transaction fees, which disproportionately affect those with limited resources. impactMarket can help streamline processes, eliminate intermediaries, and significantly reduce transaction costs. This cost reduction can enable individuals in poverty to save money, access affordable credit, and make more efficient use of their limited financial resources.

  4. Secure Identity and Ownership: Many people in poverty lack formal identification documents, making it difficult for them to access financial services and social welfare programs. Blockchain-based identity management systems can provide individuals with secure digital identities, allowing them to establish their ownership and access various financial services. By providing a decentralized and tamper-resistant identity solution, impactMarket can empower individuals to assert their rights and participate in economic activities.

  5. Microfinance and Crowdfunding: The inability for wealth creation or expansion often stems from a lack of access to capital for income-generating activities. impactMarket can facilitate microfinance initiatives by enabling peer-to-peer lending and reducing the need for intermediaries. Additionally, impactMarket’s UBI tool’s crowdfunding methods can help individuals in poverty raise funds for entrepreneurial endeavors or community projects, bypassing traditional fundraising barriers and costs.

  6. Remittances and Cross-Border Transactions: Many individuals in poverty rely on remittances from family members working in other countries. However, traditional remittance services often impose high fees and lengthy processing times. impactMarket’s Libera wallet offers faster and more affordable cross-border transactions, enabling individuals in poverty to receive funds quickly and securely.

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