What is Microfinance?
Microfinance, also called microcredit​, is a type of banking service provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services. Microfinance refers to the financial services provided to low-income individuals or groups who are typically excluded from traditional banking. Most microfinance institutions focus on offering credit in the form of small working capital loans, sometimes called microloans or microcredit. However, many also provide insurance and money transfers, and regulated microfinance banks provide savings accounts. Microfinance aims to improve financial services access for marginalized groups, especially women and the rural poor, to promote self-sufficiency.

Microfinance and Financial Inclusion
Low-income people are neglected by their financial systems because they are considered uneconomical to serve or too difficult to reach. According to the World Bank’s Global Findex, 1.7 billion adults globally are financially excluded, living without formal credit or savings. Microfinance seeks to address the needs of the unbanked by fostering economic justice and financial inclusion for all.

Benefits of Microfinance
Access to essential financial services can empower individuals economically and socially by creating self-reliance and economic sustainability in impoverished communities where salaried jobs are scarce. Small loans enable entrepreneurs to start or expand micro, small and medium enterprises. Savings help families build assets to finance school fees, improve homes (e.g., install power or running water) and achieve goals. Insurance products can offset the cost of medical care. Money transfers and remittances allow families to easily send and receive money across borders. Hundreds of millions of low-income people have benefited from microfinance since its inception, with about 140 million borrowers served by the industry worldwide annually.

Where We Work
Getmoders programs and investments impact lives in 44 countries around the world. Getmoders is the founder of Getmoders Mirco-Finance, a global network of community-based microfinance institutions and banks that operate across 20 countries in Africa, Eurasia, Latin America, the Middle East and South Asia. Getemoders supports portfolio companies that deliver life-enhancing products and services in seven of these same geographies plus 24 additional countries.

Understanding Microfinance
Microfinance services are provided to unemployed or low-income individuals because most of those trapped in poverty, or who have limited financial resources, do not have enough income to do business with traditional financial institutions.

Despite being excluded from banking services, however, those who live on as little as $2 a day do attempt to save, borrow, acquire credit or insurance, and they do make payments on their debt. Thus, many poor people typically look to family, friends, and even loan sharks (who often charge exorbitant interest rates) for help.

Microfinancing organizations support a large number of activities that range from providing the basics—like bank checking and savings accounts—to startup capital for small business entrepreneurs and educational programs that teach the principles of investing. These programs can focus on such skills as bookkeeping, cash-flow management, and technical or professional skills, like accounting.

Unlike typical financing situations, in which the lender is primarily concerned with the borrower having enough collateral to cover the loan, many microfinance organizations focus on helping entrepreneurs succeed.

In many instances, people seeking help from microfinance organizations are first required to take a basic money-management class. Lessons cover understanding interest rates, the concept of cash flow, how financing agreements and savings accounts work, how to budget, and how to manage debt.

Once educated, customers may apply for loans. Just as one would find at a traditional bank, a loan officer helps borrowers with applications, oversees the lending process, and approves loans. The typical loan, sometimes as little as $100, may not seem like much to some people in the developed world, but for many impoverished people, this figure often is enough to start a business or engage in other profitable activities.

Blockchain: The Future for Transparent Transactions
What is Blockchain?
The origin of Blockchain can be traced back to October 2008, when Satoshi Nakamoto published
the white-paper behind the idea of Bitcoin. In it, Nakamoto exposes how the Blockchain
technology can solve the double-spending problem and be the building stone behind decentralized
currencies (Zwitter & Boisse-Despiaux, 2018). The solution proposed by Nakamoto consists in
using a decentralized ledger with network-enforced processes that are supported on a proof-ofwork consensus mechanism for updating the ledgers (Davidson, De Filippi, & Potts, 2016).
A Blockchain, also known as Decentralized Ledger Technology (DLT), is a data structure which
allows to create tamper-proof digital ledgers and to share them. The cryptographic component
enables anyone to access and add into the ledger securely. There is not a third party acting as a
middleman or authority. It is near to impossible to remove or alter data recorded on the ledger.

Therefore, Blockchain can arguably diminish or eradicate fraud and corruption, and reduce
transaction costs (Kshetri, 2017).

In summary, a Blockchain is a “way of creating a robust, secure, transparent distributed ledger”
(Davidson, De Filippi, & Potts, 2016). Since Blockchain is based in cryptography, it can be
considered as a new technology for public databases or as a social technology that built for people
coordination (Davidson, De Filippi, & Potts, 2016). Therefore, the applications of Blockchain go
beyond the realm of the Bitcoin and cryptocurrencies, having the potential to disrupt multiple
sectors, including the Microfinance industry.

Elements of the Blockchain and its Implications
All the potential benefits that lay behind the Blockchain Technology (BT) stem from three main
elements of its structure: The composition of the blocks, the consensus mechanism, and the
decentralization and openness of the ledger.
Regardless of how complex the Blockchain might be perceived, its name is quite straightforward.
The so-called Blocks are batches of validated transactions that are encoded and arranged into what
is known as Merkle Tree (See Appendix 1). Each Block contains a cryptographic hash of the
previous block in the Blockchain, connecting both. Therefore, this connection of blocks form a
chain (The Economist, 2015). When a block has attained its limit of transaction hashes, it is lined
up with the previous blocks forming a Blockchain (Zwitter & Boisse-Despiaux, 2018).
A hash is a digital mechanism that compresses data into a specific format with a determined length.
For example, the hashing algorithm used by BTC is SHA-256, which stands for Secure Hashing
Algorithm, with a hash length of 256 bits. Therefore, by using this algorithm the resulting hashed
data will always be 256 bits long (ConsenSys, 2016). Thus, the hash acts as numerical fingerprint
which contains all the elements of the transaction and is imbedded in all future the transactions,
becoming the linking factor amongst all the blocks. Moreover, the utilization of hash functions in
the Blockchain is the key element to assure immutability because, in order to modify a transaction,
all the previous transactions and their copies should modify simultaneously. Otherwise, the hash
numbers will not match the records existing in all the Blockchain copies (Zwitter & BoisseDespiaux, 2018).

The Blockchain is safe due to its decentralized nature. Since the history of every transaction is
stored in blocks of data that are cryptographically tied and this block is replicated on every
computer inside the network, Blockchain is “an immutable, secure, and transparent record of all
transactions that have ever taken place” (Zwitter & Boisse-Despiaux, 2018).
Lastly, Blockchains have the capability to sustain different levels of openness. The Permissioned
Blockchain, is a private Blockchain in which only the participants of it have full accessibility on
the information. The permissionless is a fully-open Blockchain that anyone can access. Also, there
are specific-purpose and general-purpose Blockchains. The specific-purpose are fit for the
management of assets, and the general-purpose are designed to permit users to develop programs
that can be stored on the Blockchain and can be automatically executed in a distributed way.
Regardless of these differences, BTs always share specific features: decentralized consensus,
immutability, cryptographic trust, resistance against tampering, and secure information sharing
(Kewell, Adams, & Parry, 2017).

Blockchain as a Correction Mechanism
In general, systems tend to centralization because this form of organization is the most efficient to
devise, settle, and enforce rules. Centralization hinders duplications, enacts hierarchies, and
provides arbitrage in disputes. However, these qualities pose a threat if the authorities of such
systems have facility to exploit them. “Centralization brings order, but this order can be brittle,
and adaptation toward decentralization begins to make the system more robust, flexible, secure
and efficient” (Davidson, De Filippi, & Potts, 2016). Centralization is born by and for trust, which
can be used to subtract benefits when the trust is politically built. This leads to rent-seeking
behaviors, which can be detected as an endemic dysfunction of centralized systems stemming from
the dispersion of resources in the search of obtaining such benefits. Decentralization has the
promise to be a vaccine against rent-seeking practices when trust comes from cryptographic rather
than political means (Davidson, De Filippi, & Potts, 2016).

When Blockchain gets analyzed under the economic umbrella, it is clear that Blockchains behave
like markets due to its decentralized nature. “Markets are often efficient governance institutions
for spot contracts (a pure exchange economy), but where economic activity requires coordinated
investment through time (asset specificity), or an ongoing relation between parties (frequency), or
involves uncontractable dealings (uncertainty), alternative governance institutions, including
hierarchies and relational contracting, can be efficient ways to deal with the hazards of
opportunism”. In a political-economy perspective, the Blockchain can be considered as a type of
private order competitive federalism, since no entry barriers to one or more Blockchains is
equivalent to “voting with ones feet”. Therefore, efficiency gains come from the eradication of
rent-seeking behavior, which likewise is derived from the eradication of a centralized monopoly
control over the laws or the rules of the game (Davidson, De Filippi, & Potts, 2016).

Considering the previous contentions, this work argues that the Blockchain Technologies have the
potential to drastically reduce the challenges that have hampered the positive effect of the
Microfinance Movement. Also, it can prevent the appearance of rent-seeking behavior and abuses
from ill-intended MFIs’ managers by providing the proper tools for regulation and proper contract
enforcement. Moreover, it can pave the way to the appearance of new players in the Microfinance
industry and a new kind of MFIs, which could extend the level of outreach and provide better loan
conditions for the poorest of the poor.

Transparency to Reduce the Information Asymmetry
Decentralized Ledgers improves the transparency of information exchanges, rendering trust
obligations easier to discard between transacting parties. The service of funds transfer is usually
supplied by financial intermediaries. Blockchain and DLTs redistribute the responsibilities of
transfer management to algorithms and computer code. Due to the P2P configuration of BTs, the
Blockchain represents a disruptive innovation that can drastically reduce the information
asymmetry in all sort of transactions (Kewell, Adams, & Parry, 2017).
Multiple institutional and economic elements establish whether regulation, information
distribution, and contracting hinder information asymmetry, or leave substantial asymmetries.
Amongst these elements there is the capacity to write, track, and enforce optimal contracts, and
the costs of disclosing information for all the stakeholders (Healy & Palepu, 2002).
As Healy & Palepu (2002) state, there are some prescribed solutions for the information
asymmetries. First, optimal contracts that contain clauses enforcing full transparency between the
parties can tackle adverse selection. Second, strong regulation could demand more disclosure in
the governing bodies to avoid the moral hazard (Healy & Palepu, 2002). In theory, the BTs could
power smart-contracts in which the terms and conditions of credits could be fully transparent for
all the stakeholders. Likewise, a public record of transactions available on a Blockchain will help
to create the credit profiles for borrowers, translating in less over-indebtedness and proper interest
rates for the poor. Moreover, this full disclosure will facilitate the reporting and the control by
regulators, which promise to improve the practices of the entire sector.

Self-regulation to prevent Moral Hazard.
Albeit parties might be in a dispute within a contract, there is still a common benefit in maintaining
the integrity of a Blockchain, or their reputational capital within it, because of the value that
reputation has in open decentralized systems. Signaling or screening mechanisms are expected to
become more sophisticated and efficient within the Blockchain context (Davidson, De Filippi, &
Potts, 2016).
In general, regulations are linked with operation costs such as security systems, IT
investments, and the slowing down of innovations. Therefore, in some cases the benefits of
the regulation are diluted by these costs (Mersland, 2009). While the design and implementation
of the regulations are the main determinant of such benefits, technologies that enable transparent
and cheap self-regulation pave the way to enforce schemes that prevent abuses from projects
managers or employees.

Reduction of Transaction Costs.
In an economic perspective, decentralized ledgers are likely to be more cost-efficient compared to
the current centralized systems as Blockchain goes through three exponential cost curves: Moore’s
law (cost of processing digital information decreases exponentially), Kryder’s Law (cost of storing
digital information decreases exponentially), and Nielsen’s Law (the cost of transferring digital
information decreases exponentially) (Wiles 2015). (Davidson, De Filippi, & Potts, 2016).
Contrary to the current ledgers intermediaries, the Blockchain is “distributed, public, transparent,
encrypted and immutable” (Hernandez, 2017).
Garmaise & Natividad (2010) reveal that credit evaluations have a strong positive effect in
reducing the costs of finance for MFIs. In their study, they find that the interest rate charged to the
MFIs by institutional lenders decreases by 550 basis points after an evaluation. Again, the
reduction of information asymmetries has a positive impact in costs reduction (Garmaise &
Natividad, 2010). 
In the same work, Garmaise & Natividad (2010) also discover that reducing asymmetries can
considerably improve how MFIs operate. Credit evaluations act as a balancing force for MFIs
since both financial and social objectives are under scrutiny in these practices. Additionally, the
presence of rankings and indexes help to spur the competition in the industry. Therefore, the
evaluations not only help to access cheaper funds, but also they provide incentives to improve
performance (Garmaise & Natividad, 2010).

Lastly, transactions executed with smart-contracts should face less loss of efficiency due to
information asymmetries (both adverse selection and moral hazard). Therefore, it could be
expected to see less counter mechanisms such as signaling and screening. Also, Smart Contracts
could be an effective mean to set a considerable number of low probability state-contingencies
into contracts, which ultimately mean a reduction in transaction costs related to writing contracts.
Nevertheless, bargaining costs, both ex-ante discovery and ex-post renegotiation, are difficult to
be affected by the adoption of BTs. Thus, the effects on enforcement costs will depend on the
extent in which human discerning remains relevant in the transactions (Davidson, De Filippi, &
Potts, 2016).

Challenges for Blockchain Solutions
Internet Bandwidth Requirements
When it comes to evaluate the feasibility of new technologies, the key question revolves around
the point of critical mass; per a technology to thrive, technical superiority versus substitutes is not
enough. The proper presence of three elements is needed for Blockchain to succeed and go
mainstream: demand, competition, and know-how (Mattila, 2016).
Amongst the possible negative externalities that might stem from BTs, the additional bandwidth
required to deliver transactions across the network is a rising concern. When it comes to developing
countries, the expected effects may be more severe since network congestion is a common issue
in such nations (Kshetri, 2017). Although BT could have an unprecedented impact in land registry
and citizen identification, skeptics argue that Blockchain might not provide the intended solutions
due to its complexity and its energy and bandwidth requirements; elements that could be missing
during many humanitarian crisis (Zwitter & Boisse-Despiaux, 2018).

The Front-end as a Central Bottleneck
The biggest barriers for Blockchain adaptation also include the absence of education, information,
and user-friendly interfaces. Unfortunately, there has been little awareness of Blockchain
advantages amongst the key stakeholders in the Microfinance sector. For example, Saldo – a
Mexican MFI focused in financial literacy- found that it is very complex to talk about Blockchain
with both funders and beneficiaries. The key is to start first with the MFIs, which are more likely
to be familiar with BTs, to downstream and motivate the construction of knowledge (Kshetri,
2017).
Even when digital or e-banking has been steadily rising over the last decade, and more and more
Fintech initiatives have appeared threatening to take the place of the conventional banks, there is
little evidence of this happening. With such trend not moving forward, it is natural to wonder
whether this behavior will be replicated by the beneficiaries of MFI if Blockchain technologies are
adopted, therefore hindering the full potential that decentralized ledgers pose for the micro-loans.
Sriram (2015) first notes that, in traditional commercial banking, the smaller borrowers and lenders
will still need banks to carry out financial intermediation as their transaction sizes might not justify
direct contact or transaction with the capital owners. Also, Sriram mentions that risk-averse
individuals would continue to use traditional Financial Institutions because their trust is reposed
in the name of a “bank”. This trust has been long nurtured by national governments taking the role
of protectors of the depositors by regulating banks through licensing, standardized reporting,
monitoring through regular inspections, and insurance requirements to cover for all or part of the
savers’ deposits.
Solutions powered by DLTs need to be designed with an ethical and moral base, by taking in
consideration the digital divides and inequalities that can arise in the real world. Empirical
evidence shows that the groups in the higher strata tend to adapt and benefit from new technologies
first. People in developing countries, rural communities, or marginalized are less likely to have the
digital literacy to properly interact with BTs, which ultimately can evaporate the potential for good
within the DLTs (Hernandez, 2017).

Volume of Transactions and Cost-Efficiency
Unfortunately, Blockchain is an energy-intensive technology. Even when solutions to reduce the
energy needs and costs have been implemented, BTs will always require server capacity and
computational power to process the transactions. Hence, in countries in where energy
infrastructure and internet access are insufficient, BTs quickly reach their limit in terms of
scalability. Moreover, internet accessibility and energy security are especially troublesome in areas
in which the poorest of the poor reside (Zwitter & Boisse-Despiaux, 2018).

Energy consumption also depends on the hardware used for operation of the network. Miners keep
the specifics of their hardware secret. Therefore, it is complicated to calculate the power needs and
usage of a network. An estimate proposes that even when bitcoin miners use the most efficient
hardware available, the annual electricity consumption could reach the two Terawatt-Hours mark
(above the consumption of 150 thousand people in the US). In a pessimistic scenario, the amount
of electricity used could go up to 40 Terawatt-hours (Kshetri, 2017).

Nowadays Blockchain dull when compared to the established transaction and ledger technologies.
Bitcoin, which was created to replace regular fiat currencies, can only perform 7 transactions per
second (tps). Ethereum, which was designed to tackle this limitation, is limited to less than 50 tps.
Therefore, there is still a big gap when compared to PayPayl’s 450 tps Visa’s 24,000 tps (Koticha,
2018).

These figures open doubts on how better BTs can become in terms of computational capacity and
energy efficiency. While curves such as the Moore’s law leaves hope for Blockchain to achieve
scalability, the speed in which the technology evolves is crucial to meet the expectations that have
been raised over the last couple of years.

Regulation and Validation
As already mentioned, an economic order founded on the Blockchain can fully automate and
implement Smart-Contracts through DAOs. Nevertheless, the contractual enforcement remains an
issue when the sanction of a violation cannot be guaranteed by any authority or government.
Therefore, the question of whether the SCs operate at the coast of the Law raises (Davidson, De
Filippi, & Potts, 2016).
Technological solutions that tackle social problems do not operate in isolation. The potential that
any of these solutions has highly depends on the organizational and strategic levers of such
innovations. If the institutional context generally determines whether a social intervention will
succeed or not, it is only natural that the same will apply for the ones based on technological
innovations (IDF, 2017).
The risk of not adapting the Blockchain as a solution is not only limited to the lack of digital
literacy or the wrong implementation of the front-end. Projects using technological innovations to
tackle social problems regularly “find that getting buy-in is the toughest part of delivering an
effective solution, not the technology” (IDF, 2017). The buy-in not only has to come from those
using the technology but to all the stakeholders involved in the social initiative.
It is expected that Governments that have a history of commitment with transparency are more
likely to welcome Blockchain-based solutions. On the other hand, those that look for opaque
environments will likely hinder these efforts. The vested interest of some groups in power could
be the major obstacle to for the implementation of DLTs in the search of better transparency. The
deep understanding of the economic, social, and political context is key for the success of
Blockchain-based interventions (Hernandez, 2017).
The efforts to regulate the Blockchain have raised attention. The role of governments and
regulators are still not clear. Also, there is no clarity in the ways to set priorities and allocate
resources to different economic and social segments. The implementation of BTs may also conflict
with regulations and international laws. For example, the information stored in a decentralized
ledger is immutable and open to all public, which can go against the right to be forgotten and
privacy rights (Kshetri, 2017).

Ultimately, a legal framework seems to be vital for Blockchain to reach its full potential, regardless
of the field the technology is applied to. Zwitter & Boisse-Despiaux (2018) state that, at least for
the humanitarian sector, BTs will need to comply with international legal frameworks such as the
Human Rights Law or the International Humanitarian law. For the Microfinance sphere this might
prove to be more challenging since both humanitarian and financial should be integrated in the
design of a solution. Exporting successful solutions might prove infeasible when national financial
regulations do not match the elements of successful implementations.

Rigidity and Privacy Issues
While the immutability of the information in a Blockchain and the automated nature of the SmartContracts are arguably the most appealing features for MFIs, certain concerns raise regarding the
rigidity of the technology and the violation of privacy rights.
The potential of creating immutable ID records and automatically execute contracts, while
promising, will probably bring rigidity to the processes by taking the human margin of appreciation
out of the equation (Zwitter & Boisse-Despiaux, 2018). When considering the extreme
circumstances the poor face in their lives, full rigidity might not be as desirable for the
Microfinance and Financial Inclusion movements.

Also, there is no clarity in how to prevent the misuse of data, or enforce the right to be forgotten,
when Blockchains provide immutable and decentralized transaction information. Therefore,
privacy and data protection poses a considerable obstacle for the implementation of DLTs, notably
when identity registries and other databases contain personally identity.

For Entrepreneurs and Non-Financial Institutions
Since Blockchain can change the landscape of the Microfinance sector, there is space for new
players to enter at different stages of the value chain. For example, by understanding that the digital
literacy and a user-friendly interphase are vital for the adoption of Blockchain, Startups could
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focus in creating digital tools for financial education and in providing software developing for
MFIs Blockchain interphases.

Also, there are examples of large manufacturers, retailers and wholesalers that are playing an
incremental and complementary role in providing specialized financial services. For example, in
Mexico, consumer credit from Banco Wal-Mart and micro-supplier credits from Cementos
Mexicanos (Cemex) are addressing the needs of the poor. Another financial services are offered
by non-financial firms that are acting as local agents for banks in remote areas, or in areas where
there are no bank branches, to better serve the poor and the unbanked (Chibba, 2008). BTs foster
the provision of such services by leveraging the benefits of Smart-Contracts and the efficient
formation of credit records that Blockchain enables.
Moreover, in a new financial environment powered by the Decentralized Ledger Technologies,
native players of such technologies can slowly displace the incumbent MFIs from the leadership
of the sector. Efficient Blockchains that can hold transactions per second at similar rates as PayPal
or other digital payment platforms, with robust Smart-Contracts designed to service the poor, and
the proper outreach channels to provide digital and financial literacy, could create a new type of
MFIs that only would be connecting savers directly with borrowers at a relatively small fee per
transaction. This sort of schemes would resemble a marketplace in which the fund allocations
would be more efficient and interest rates could be drastically reduced, increasing the outreach of
the entire Microfinance Movement. Solutions of these kind have been already tested across
different geographies, ranging from Africa to Myanmar, with promising results. Still, the greatest
challenges to face are the regulations and the creation of trust in BTs.

For Incumbent MFIs
As argued in this work, BTs have the potential to reduce the effects of the structural flaws in the
Microfinance industry. MFIs could leverage the openness and immutability of the Blockchain to
create credit records that make risk assessment and management more efficient. The employment
of SCs could make the collection process more efficient and could help to diminish the need of
risky collaterals. Moreover, the near-time component in the recording of transactions would make
the reporting process more efficient and transparent, incentivizing the improvements in
performance and diminishing the appearance of rent-seeking behavior.

Additionally, DLTs could help in the provision of ancillary and complex services to the poor, like
insurances, remittances, and saving schemes. Using customized Smart-Contracts MFIs could
expand the coverage of their insurances without incurring further risks. The cost to set up the
proper infrastructure to offer remittances services could drastically diminish once the Blockchain
reaches certain maturation, integrating this service with the provision of micro-finance and saving
vehicles. Lastly, the same SCs’ logic could be used to assure that the beneficiaries of MFIs save
certain amount of their additional incomes and that those savings could generate certain degree of
returns without leaving the beneficiaries exposed to abuses.
Considering all the previous contentions, it is safe to claim that embarking into BTs is a wise
decision for the MFIs. Even more, doing it on an early stage could help to prevent the displacement
by Fintechs or commercial banks, which hold a greater expertise in digital solutions. By leveraging
their current field expertise and knowledge of the beneficiaries, MFIs could guide the creation of
Blockchain-based solutions that are properly catered for the poorest of the poor.

For Governments and Regulators
Many configurations of the Blockchain might be used to foster FI using Microfinance as a vehicle.
For this matter, the Microfinance sector could potentially benefit from numerous application
including public, private, federated or consortium Blockchain. Looking at the current scenario and
at the numerous players involved in the microfinance sectors, BTs could be implemented at various
levels and with very different objectives.
As previously mentioned, what has been observed across several MFIs and nations is that the entire
lending process could sometimes become a pervasive mechanism for mere profit generation, in
which the community and the poor end up, at best, not being benefited at all. One of the main
reasons behind these incidents has been is the lack of transparency in the various step of the
process, with difficult traceability of the amount of money borrowed, rates, cash outs, etc. For
those reasons the type of Blockchain that probably better fits the scope and objective of
Microfinance, besides being implementable without the need of a specific party that must be
constantly and professionally involved, is the public one.
Public Blockchains would guarantee perfect traceability of every action executed by all the parties
involved in a microfinance transaction, guaranteeing the public access to all the information
generated and stored. At the end, the beneficiaries of microfinance will be both “protected” and
benefited, since everything will be traced and will not need to rely on the trust on the quality of
the reporting by MFIs and their managers. On the other side, regulators and lending parties will
have just the same access to the information required, besides being able to fully monitor the
performance of MFIs throughout all the steps. At the end, regulators could be more efficient in
surveilling the actions of MFIs and could increase their response time in case of any anomaly rises.
Nevertheless, the greatest challenge for the regulators would be finding ways to achieve these
levels of transparency without violating privacy rights and guaranteeing the right to be forgotten.
The figure of consortium Blockchain or hybrid public/private schemes could be the key to get the
best of both worlds.

Conclusion
The Microfinance Movement has been an emblem of the development economics sector over the
last 3 decades. While there is still controversy regarding the depth of impact that Microfinance in
rising people out of poverty, empirical and theoretical research shows that it is important tool for
achieving Financial Inclusion and Economic Growth in poor households.
Regardless of the constant evolution and sophistication of the Microfinance industry, structural
challenges still hinder the full potential of the MFM. Especially, the persistent presence of
Information Asymmetries in the Microfinance sector frustrates the efforts to reduce operation and
funding costs, achieve financial sustainability and scalability, and implement proper reporting
schemes. Arguably, the reduction of such asymmetries could drastically increment the outreach
and coverage goals of the sector.
Amongst all the technology innovations that could revolutionize the financial sector, this work
argues that Blockchain has the potential to disrupt the entire sector. The immutability,
transparency, openness, and security of the technology makes it the perfect candidate to protect
the poor from abuses from ill-intended players. Nevertheless, BTs developers should keep in mind
the lack of digital literacy in the poor, the transactions that BTs can hold, and the possible attempts
against privacy rights. Whether BTs could disrupt Microfinance will depend in how fast the
technology matures and how much trust this system can create on lenders, borrowers, and
regulators.

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