22E/ Decentralized identity for financial inclusion. Field notes from Kenya

From IIW

Decentralized Identity for Financial Inclusion: Field Notes from Kenya

Thursday 22E

Convener: Johannes Ebert

Notes-taker(s): Neil Thomson

Discussion notes, key understandings, outstanding questions, observations, and, if appropriate to this discussion: action items, next steps

standard SSI use cases not the same as financial inclusion

Logging provides data to show success of roll-outs to convince prospective clients

Banks (and other financial institutions) only see data they exchange - e.g. rent may not be considered in credit score as the banks don't interact with the rent cash flow (payer/payee). They do not currently use data except from other major providers (e.g. data brokers) for which many transactions are invisible.

Major goal for banks - risk reduction

In 3rd world - small stores have no visibility - bank used a video to assess a noodle store.

Kiva - looking @ supply chain (Margo Johnson)

supply chain lending

Types of reliable information for lending?

- this is expanding as an alternate (supply chain financing their customers (intermediaries in the supply chain))

- Using smart phones for data collection and transaction capture

- Incremental (integral) building of credit score

- Loans for service/product being immediately applied by the lender to the merchant vs going to the end-customer (who is the service/product recipient)

- Attractive to suppliers (joining existing platform and customer base)

- Attractive for intermediaries in supply chain, and banks and end customers for the same reason - lower cost of financial, increase of customer base and revenue, lowering of risk

- pre-this approach, changing lenders was costly, now it's simpler, faster and cheaper

- Integrated, small vendor friendly. Filling a vacuum that first world financial approach doesn't service

Feedback (from others) is in some african countries, the payment systems are too fragmented with too many different workflows. Chaotic.

Kenya was a unique opportunity as they had only a single payment system (ripe for expanding on that base)

Provider to provider transactions not well supported in multi-payment scenarios as they are all trying to dominate the market, not cooperate.

Some communities are all cash, with only temp storage (of cash) on debit cards.

In some cases fund transactions, including lending - much of the data discarded (or not managed) historically

Tech Stack for credentials?

  • In many cases only basic phones or no phones

  • Use a sponsor, agent, guardian (person with a smarter phone) to do the digital transactions

    • Can generate QRcodes for identification person w smartphone or other connected device for the sponsored person

  • Lots of “friction” to digital for basic phones

  • Very hard to build for older, not very good smartphones

  • Many smartphone users do not know how to use anything but basic features

Many Dig Id projects underfunded, hard to get momentum - would be easier if more of the stacks were complete via open source and no/low cost for non-profit or early stage roll-out

Africa - support, services scattered, non-homogenous. Timing (when sufficient infrastructure and demand exist) is everything (not easy).