Sela Labs and The Creation of Credit Markets in Developing Economies
By Henry Greene
Sela labs is a fintech startup focused on aiding the cleanup of environmental damage caused by oil spills in the Niger River Delta through blockchain and AI facilitated credit data, loans, and payments. They are playing a pivotal role in facilitating the transactions required for UN grants for sustainable development to make an impact. At first, their project might appear a philanthropic exercise, however they seem to have identified a key developing market inefficiency that goes beyond an environmentalist cause. That inefficiency is the lack of credit data and financial trust generally in African countries and many other frontier markets. It is only a matter of time before other fintechs or Sela Labs itself begin to capitalize on the opportunity presented by this inefficiency.
To put this in perspective, in the United States and other developed nations borrowing is possible, to some degree at least, for the majority of the population. Borrowing occurs in the form of credit cards, mortgages, business loans, and a multitude of other financial instruments. Such widespread borrowing is good for individuals and the economy as a whole. While credit has often been the source of crisis, it also allows individuals and businesses to secure funding that will lead to future contributions to the economy. In the developed world, credit is made possible through trusted institutions, the most important being banks and the government.
However, in many developing countries trusted institutions are nonexistent. As the governments themselves are corrupt, or perceived to be, it is extremely difficult for them to lend credibility to other institutions or individuals. The result is that the average citizen has no access to mortgages or, in many cases, any part of the international financial system. Furthermore, as incomes might be extremely low by developed world standards, lending becomes charity rather than an accretive exercise as it is in the developed world.
Fintech and Sela Labs enter the scene against this backdrop. Blockchain and AI significantly economize both the issuance of loans and ensuring compliance with their terms. Thus, as Sela Labs has been proving, fintech is the key to the creation of credit markets in the developing world. Where human agents are unable to extend credibility, these technologies are able to fill the role of a trusted institution, at least temporarily.
Moreover, successfully constructing a credit market in fringe economies has the potential to be extremely lucrative. Blockchain is, after all, a database. Storing credit information in an immutable ledger is cheap, but that data can be sold for a profit should its value rise.
In its effort to move up the value chain, China is likely to begin scouting locations to export its low-end manufacturing needs. When that happens and a fringe economy sees a significant rise in incomes, the holders of existing credit data from that economy, i.e. pioneers such as Sela Labs, would be poised to make a significant profit.
