Even if rural communities need financial services the most, they continue to be an underserved market, which basically means that large numbers of people don’t get the necessary support to manage their finances and improve their livelihoods. Indeed, some people living in rural areas have an account with a bank or a mobile money service, but usage tends to be low because services are mainly designed for the needs of urban customers. Providing opportunities for marginalized individuals to access services like savings, credit, and insurance can unlock new avenues for economic growth over the long term.
Smaller households complement seasonal agricultural income with labor on other farms/ranches or non-agricultural enterprises, such as transportation. People living rurally, especially women, devote much of their time to unpaid labor, which can include cleaning, cooking, and looking after children. Financial services are critical to build resilience, that is, to be able to cope with unexpected circumstances such as accidents, job loss, or ill health. Banks avoid or fail to provide sustainable services in rural areas, and it’s precisely this exclusion that prevents communities from realizing their dreams and goals.
Cryptocurrency Provides Access To Financial Services To Those Left Out
The topic of cryptocurrency attracts a great deal of attention, largely due to its decentralized nature, which enables it to exist outside the control of governments and central authorities. Let’s take Ethereum as an example. With the right approach, you can move ETH from one wallet to another safely and without delay, whether it’s a payment or a gift. If you look closely at the Ethereum price, you’ll see that it’s possible to turn a profit by simply waiting, meaning the token is a good long-term investment, giving users more time to overcome market fluctuations and potential downfalls.
Cryptocurrency contributes to promoting financial inclusion, but attention must be paid to the fact that it’s still in the early stages of development, and it’s not a panacea. Accounts allow people to store money and effectively save for the future, savings expand investment possibilities, not to mention that the leftover money guarantees children’s education and offers protection from financial shocks. The advantages of cryptocurrency include but aren’t limited to:
- Easy onboarding: Someone living in a remote area can use Ethereum to send and receive money without traveling long distances. They need a smartphone with an Internet connection to use cryptocurrency. There’s no identity verification or background check to open a digital wallet.
- Decentralization: Nobody owns the blockchain network – it’s controlled by users worldwide. Cryptocurrency is, therefore, a viable alternative for individuals to store and transfer wealth at reduced costs, as transactions aren’t subject to the same fees and delays as bank transfers. Anyone can see transactions occurring live.
- Access to credit: The blockchain ensures access to borrowing opportunities. People can use cryptocurrency as collateral, and like a standard loan, the cryptocurrency loan is paid off with interest over a set time.
There’s no single authority controlling the blockchain ledger, meaning the rules are dictated by a consensus protocol, which requires most other computers to agree on network changes. Blockchain is a trust-building technology.
What Are The Biggest Challenges To Cryptocurrency Adoption?
Digitally-mediated financial inclusion isn’t a panacea, it’s merely a tool, and the degree to which blockchain technology realizes its potential for financial inclusion depends on how well stakeholders manage its development. The main challenges associated with the blockchain ecosystem are:
The Uncertain Regulatory Picture
Regulatory uncertainty about cryptocurrency raises the question of whether or not to adopt blockchain technology. It’s still unsettled whether blockchain applications can work within the existent regulatory landscape, so regulators in the financial markets must gain a better understanding of the technology and its possible impacts to work out ways to govern its uses. Rapid fluctuations in the cryptocurrency market are the result of uncertain financial regulatory policies.
Trust Across Culture And Context
Placing trust in a decentralized system is easier said than done – not even blockchain users trust each other. The chaining of the blocks guarantees that the content remains trustworthy at all times, yet most people will still want laws and regulations to be certain their rights aren’t abused by others. Cryptocurrency requires a more visionary approach for grasping its potential. Similar to other technological systems, the blockchain comprises software code and human activity, and it’s not enough to trust the computers.
Issues Affecting Scalability
As transaction volumes increase and the demand for decentralized applications grows, the blockchain network strives to process transactions efficiently. Before being widely adopted, cryptocurrency must prove itself, in other words, be at the same level in terms of speed and scalability. Ethereum, for instance, takes advantage of rollups, plasma solutions, zero-knowledge proofs, and so on to bring mass adoption to the platform.
Policymakers Must Enable An Environment For Financial Inclusion
Rural financial inclusion initiatives are customarily run by central banks and ministries of finance, and approaches often include reaching out to key stakeholders from the development sector, NGOs, community-based organizations, and so forth. People could migrate to urban or neighboring rural areas for remittance transfer growth and efficient money transfer services. Since that isn’t always an option, it would be better to finance through value chains to improve creditworthiness and help raise incomes. Increasing access to credit alone isn’t sufficient to reduce constraints for small and medium-sized enterprises.
Cryptocurrency, created and stored electronically on the blockchain, can play an important role in making financial products and services accessible to all individuals and businesses, but there are serious challenges to its widespread adoption. By reinforcing factors like ease of use, trust, and usefulness, policymakers can promote cryptocurrency awareness and acceptance. There’s no one-size-fits-all approach, which means the choice of policy instruments is dependent on context and requires a deep understanding of how each can guarantee financial inclusion. Research is needed on agricultural value chains to improve risk management and enhance capacity-building measures.
Concluding Thoughts
Though poverty has slowly but surely decreased in rural areas, it’s still high, so many communities experience notable financial challenges. Cryptocurrency could act as a social innovation, and barriers to adoption stem from a lack of awareness of the benefits it offers. But not only.
