It is hard to imagine to live without a bank account. In the more developed countries we can buy things online from China and ship it to the Netherlands. We can sell our services digitally to almost anyone in the world. The only prerequisite is that you have a bank account and you are good to go. You can buy and sell things online, crowdfund new businesses, invest money in stocks, setup a webshop to gain more traction et cetera. What would you do without a bank account?
But here is the crux, over one billion people in the world do not have access to financial services. That means they don't have a bank account and thus they cannot get loans, save money or invest in new businesses. The impact of this, so called, financial exclusion is that people from rural communities in developing countries don't have access to international markets. They can't buy or sell things digitally, they can't get loans or investments to grow their business and they can't receive money from distances.
Imagine you are a 25 years old women in Kenya and you sell your beautiful handcrafted products in order to feed your first born. You can't sell them online in a fancy webshop so you have to either sell it for very low prices to all kinds of resellers (mostly expensive hotels or shopping malls) or you have to stroll through the streets looking for a customer. You can't get a loan because you don't have a bank account and without a loan you can't invest in new tools. You are dependant on the customers or the middle man who pay you with cash. As you can hear, this is not a great bargaining position. Most people get stuck in this position and will therefore not be able to escape the poverty trap. The expansive hotels and shopping malls and other parties take their advantage over this. They can sell the products for high prices to customers all over the world because they have bank accounts and the money to trade across borders. It is not only that the people are in a poverty trap but the inequality rises as well.
What causes this? The first problem is that most people can't get a bank account because they are not credit worthy. But this is an infinite loop; not credit worthy means no investment and thus no growth and thus you will never be credit worthy. This is a self-full-filling prophecy and very hard to escape this loop. Traditional banks and financial service providers do not have an incentive to change this. If you have no money they can't get money from you and thus you are not interesting.
On a macro level another problem arises; The international banking system is a very old infrastructure. But it is still profitable so why change it? The problem is that international money transfers take forever and the costs are high. Because we do business in Kenya we've experienced the difficulties to transfer money. Sending 50 dollars would cost 19 dollars and sending 240 dollars cost 40 dollars. And our friends had to wait for more than a week to receive the money. Image the frustration in our collaboration... So what if you want to collaborate with that Kenyan girl that makes beautiful handcraft products? First you pay more than 20% transaction costs and then you would have to find someone who gets the cash and bring it to her. This may be one of the reasons that we can buy a bag in Italy, a phone cable in China and fancy shoes from the US but are not able to buy beautiful handcraft products from developing countries.
We want to break this loop and stimulate craftsmen and artisan in developing countries to break the poverty trap! Luckily mobile and digital money gain traction all over the world. In East Africa, for example, mPesa is growing quickly. mPesa is mobile money that can easily be transferred among mobile phones without high fees. People no not have to have a bank account and can quickly setup an mPesa account and start doing business.
Next to that we believe that cryptocurrencies can be a part of the solution. Although it is often seen as a gambling toy for rich millennials it actually has a use-case in countries as Kenya. We've tested sending money from the Netherlands to Kenya. Within 30 minutes we've setup the account and 15 minutes later our colleagues received 100 dollars with a 0,25 cent fee. Compare that with 20 dollars and a week waiting time! The technology is just getting started and there are lot's of hurdles to overcome but the first results are astonishing! Thinking further, we could send money internationally digital and then in the country we can easily transfer that via mPesa accounts.
We truly believe that if we can start doing business with all artisans and craftsman all over the globe that we can, together, break the poverty gap and make this world a better place to live. Not only will communities increase in livelihood, you will also be able to have a more diverse choice in products. So next time when you want to order a product from another factory in China, the US or Italy, we promise that you can also buy beautiful product crafted with love and passion!
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