The global unbanked population is still largely outside the financial fold, despite the potential benefits that digital assets can offer them. According to BanklessTimes.com, only around 13% of the world’s unbanked population owns cryptocurrency.
This leaves a large part of the population without access to loans, credit cards and other financial services that can help them improve their lives.
According to the CEO of BanklessTimes.com,
Ways DeFi can help those living on low incomes
Banking systems have long been exclusive, catering to those who already have money. Decentralized finance (DeFi) and other financial technologies can change that by giving low-income populations access to essential banking services.
Thanks to DeFi, people can now borrow, lend, and trade without a bank. This allows those who are excluded from the traditional banking system to participate in the financial system and build wealth.
The DeFi infrastructure uses technology and P2P systems to offer “accounts”, savings and loans, payments and investments. By definition, this model eliminates the need for intermediary institutions. With an Internet connection and a cell phone, low-income people can access the same financial opportunities as anyone else.
Many projects are working on it, but one of the most promising is MakerDAO. MakerDAO is a decentralized autonomous organization that issues the stablecoin Dai, which is pegged to the US dollar.
Dai can be used in the same way as any other currency, but it has some advantages that make it especially useful for those who are unbanked or underbanked. For one, it can be sent and received anywhere in the world without a bank account.
It also has very low interest rates which makes borrowing more affordable for people. This is important because one of the main reasons people are shut out of traditional banking is because they don’t have enough money to meet the minimum requirements for a bank account or loan.
How is DeFi different from traditional finance?
Traditional finance is centralized, which means that a small group of people or institutions have control over it. DeFi is decentralized, which means anyone can use it, and there is no single point of control.
DeFi is also open and accessible to anyone with an internet connection. In contrast, traditional finance can be difficult for those who live in remote areas or don’t have a lot of money.
Soon we should see more and more people moving away from traditional banking systems and into the world of decentralized finance. This will give them access to the same financial opportunities as anyone else, regardless of income or location.
Few know about the potential of cryptocurrencies and digital assets to help the unbanked population. Even fewer people use them for this purpose. This needs to change if we want to see a more inclusive financial system that helps everyone, regardless of background or income.
Over time, awareness of the potential of digital assets will increase and more and more people will start using them to improve their lives. This will help close the gap between rich and poor and ultimately make the world fairer.