Nanofinance to disrupt the traditional norms of peer to peer lending
Mohammed Yunus Khan introduced the world to microfinance and its limitless possibilities of providing the unbanked population of economically backward and developing countries financial aid through peer to peer lending. Microfinance at is core was to provide financial aid to those people who were eligible to receive grants from financial institutions.
The agenda was to provide small amounts of loans which would be repaid in monthly installments.
The concept of microfinance, however, began adopting a new persona when microlending organisations with their traditional banking norms started implementing them. To keep the risk at bay, the interest rates were significantly higher and the eligibility criteria stringent.
There was a need for a peer to peer lending platform which was able to perform seamless cross border transactions while sticking to the original mission statement, which was to provide financial aid to the unbanked set of people.
The emergence of Nanofinance:
Nano finance at its roots is a P2P lending platform whose users grants small amounts of capital ranging between 10$ to 500$ for a specific period of time at lower interest rates and the significant repayment period.
While the eligibility criteria for receiving nano finance from organisations vary, sometimes all the applicant needs to apply for one is a valid ID, a selfie and financial records.
Users are now able to raise funds to meet their business sustenance needs in as less as 15 minutes.
Implementing nano finance has allowed women entrepreneurs to getting access to real-time money in shorter duration. This has not only increased the employment rate in women across the world but has also included them in the financial system, thereby allowing them to build their financial credit score for future transactions.
A study has also proved that women are less likely to default on their loan repayment when compared to men. While the global default percentage of men is at 3.5%, women currently are at a whopping 1.8%.
This allows companies who are looking to scale nano finance cater to a special niche where the risk is low and return is high.
With nano finance, users no longer have to accept the ever-changing terms and interest rates of local loan sharks. Nano finance now allows financial inclusion with efficiency, transparency, and competitive rate of interest for its users.
Blockchain to mitigate costs in cross border payments in nanofinance:
Cross border payments come with its fair share of deductions due to a large number of intermediate regulatory bodies involved, with blockchain this can be reduced significantly.
Users can directly get funds to their wallets or can go to a local store to procure the funds upon verification of grant eligibility.
The current systems are relying on payments through wallets and collecting cash at designated centres. However, evangelists in the blockchain and nano finance space are looking to disrupt this by providing funds directly to their users.
