The Stellar Development Foundation, responsible for the Stellar network's development, has unveiled a framework aimed at assessing the effectiveness of blockchain projects in fostering financial inclusion, particularly in emerging markets. Developed in collaboration with global consulting firm PricewaterhouseCoopers (PwC), this framework is detailed in a white paper published on September 25.
This framework has led to the conclusion that blockchain-based payment solutions can significantly improve access to financial products by reducing fees to 1% or less. Additionally, these solutions have demonstrated an ability to accelerate payment processing times and shield users from inflationary pressures. Some blockchain projects have positioned themselves as facilitators of "financial inclusion," especially targeting unbanked populations in developing nations, which has been an effective strategy for securing funding and support from organizations like UNICEF.
Stellar and PwC, in their white paper, argue that it's imperative for projects to possess a framework for assessing their potential to enhance financial inclusion. They emphasize that strong governance and responsible design principles are vital for successful implementation. The proposed framework comprises four key parameters: access, quality, trust, and usage, each with its own set of sub-parameters. For instance, "access" is further broken down into components like affordability, connectivity, and ease of startup. The white paper provides recommended measurement methods for each sub-parameter, promoting a scientific approach to assessing effectiveness.
Moreover, Stellar and PwC advocate a four-stage evaluation process for addressing financial inclusion challenges. This process entails identifying the solution, target population, and relevant jurisdictions in the first phase. In the second phase, barriers hindering the target population's access to financial services should be identified. The third phase involves utilizing "Level Charts and Guides" to pinpoint the most significant onboarding obstacles. Finally, the fourth phase entails implementing solutions that prioritize key parameters for efficient resource allocation.
Using this framework, the research team identified at least two blockchain solutions that have proven effective in enhancing financial inclusion. The first is related to payments, as the study discovered that traditional financial applications charged an average of 2.7-3.5% for sending money between the United States and certain markets, whereas blockchain-based solutions charged 1% or less. These apps in countries such as Argentina, Kenya, and the Philippines have made electronic payments accessible to those who were previously unable to afford them.
The second effective solution involves thriftiness. A stablecoin app in Argentina empowers users to invest in inflation-resistant digital assets, aiding in the preservation of wealth. Stellar has actively promoted financial inclusion, such as aiding Ukrainian refugees in December 2022 and partnering with Moneygram on September 26 to launch a non-custodial crypto wallet accessible in over 180 countries. Nonetheless, some financial experts have expressed concerns regarding the use of cryptocurrencies in emerging markets, citing potential financial risks, as noted in a Bank for International Settlements paper published on August 22.
