Microfinancing has been hailed as very successful in enabling the poor to access credit and other financial services. According to a World Bank report, up to 20% of the adult population in Africa and Asia get all their financial services through micro-financing entities.
Microfinancing could, however, do even better with technologies like blockchain. One of the blockchain microfinancing use cases is AssetStream, a P2P lending platform with a global reach to the unbanked and established partners as agents.
AssetStream, together with its strategic partner ‘CreditOK’ which specializes in credit scoring, will conduct due diligence for both individual and business types of borrower. This allows AssetStream to provide a ‘Credit Rating’ for Small and Mid-sized Enterprises (SMEs) and ‘Credit Scoring’ for the individual borrower.
Credit Rating and Credit Scoring measures the probability of the borrower’s ability to repay both principal and interest. Every punctual payment or fulfilled commitment will immediately affect the credit rating/scoring in a positive way, and vice versa, as the platform promotes punctuality to the community.
The ‘Credit Rating’ AssetStream provides to ‘PICO Finance’ is very straightforward, as it will happen according to their published financial reports as a financial institution. AssetStream will push forward to ensure the lowest NPL rate as possible and implement CreditOK’s Credit Scoring System (CCSS) and eKYC to ‘Pico Finance’.
The ‘CCSS and eKYC’ process will replace ‘PICO Finance’s’ traditional paper personal-loan form and will indicate an individual measurement which will display the best loan value for the individual.
Another problem the blockchain solves for the micro-financing platform is improved security at a low cost. A report by the accounting firm Deloitte, some financial institutions spend as much as US$100 million annually to protect their data from possible hacking. And still hundreds of millions of dollars are lost annually to hacker attacks.
Last but not least, the blockchain allows for the deployment of smart contracts. These are agreements written in code that self-execute according to predefined conditions. For example, funds locked in escrow as collateral could automatically go to the lender on defaulted loan payments.
AssetStream has its own rating criteria which are used diligently to qualify borrowers. Lenders will sift through available “Loan Contracts” manually and can opt for the automatic system through AssetStream autonomous matching system.
- The manual method for lending consists of a lender handpicking a loan application from the platform.
- In an automated lending process, the lender sets up a certain criterion for his ideal loan and the system will find projects that match and are in the fundraising phase.
- Examples of criteria are minimum credit rating of the borrower, minimum interest rate, maximum duration of the loan, maximum lend out the amount.
- The credit rating of small and medium enterprises will always be done manually but for individual borrowers, it will happen automatically.
- If individual borrowers are not satisfied with their credit rating, they can choose manual credit rating. This manual credit rating will have a fee in ASD token.
Up until the turn of the century, financial institutions did not see value in serving those at the bottom of the economic pyramid. They couldn’t see how 1.7B people could translate into meaningful profits. But AssetStream is ahead of its time. On the blockchain.
AssetStream recently signed an MOU with Max Property Group (MPG), an international property investment company. Max Crowdfund is a crowdfunding platform and together with AssetStream, projects on massive numbers of their communities to support direct integration of their blockchain platforms.
250+Million Members applaud as the English Learning platform English Forward entered into an MOU with AssetStream to access microfinance resources for its teachers and learners community.