How can blockchain-based lending platforms support microcredit activities in developing countries? An empirical validation of its opportunities and challenges

Md Mahfuzul Hoque, Tyge-F. Kummer and Ogan Yigitbasioglu

Technological Forecasting and Social Change, 2024, vol. 203, issue C

Abstract: The aim of this paper is to explore the opportunities and challenges of using blockchain technology to support microcredit activities of microfinance institutions operating in developing countries. Microfinance is widely regarded as a tool for poverty alleviation and a means of integrating the unbanked population into the financial system. Using expert interviews from several industries including microfinance and blockchain, we explore the potential and challenges of blockchain-based platforms in microcredit settings. The findings suggest that blockchains could create credible financial profiles for lenders, automate contracting through smart contracts and attract funds at lower costs. However, coordination complexities, strategic issues, and privacy concerns are key challenges to blockchain implementation. The study advances the understanding of blockchain applicability in the microcredit space and carries practical significance for microfinance institutions as to how blockchain can — in combination with mobile money — improve operational efficiency and strengthen governance on microcredit activities.

Keywords: Blockchain; Financial inclusion; Microfinance; Microcredit; micro-lending; Mobile money; Unbanked population (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:203:y:2024:i:c:s0040162524001963

DOI: 10.1016/j.techfore.2024.123400

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