Bitcoin + Microfinance + Mobile
What happens when you take Muhammad Yunus’ microfinance, combine it with Bitcoin, and deliver it via mobile? Lets break this down.
Muhammad Yunus won the Nobel Peace Prize for founding Grameen Bank. He is a Bangladeshi social entrepreneur, banker, and economist who pioneered the concepts of microcredit and microfinance. Microfinance is a way for local communities to give and receive loans and financial assistance in a way they couldn’t be done through a bank. It is a way for communities to invest in themselves and develop from within, each member assisting to the growth of the whole, isolated from the outsiders. Communal trust runs at its core. Say I am in India and a friend of mine wants to start a local business, traditionally he would go to a bank and try to get a loan in order to have the necessariy capital to start his business. What we do instead is get a group of us, say 10 of our closest friends (within the community), to all loan him the money to get his business off the grounds. Its distributed and happens at the communal level. There are tons of essays on this topic, but lets take what we have and move on to Bitcoin.
The aspects of Bitcoin that I want to focus on is its peer-to-peer capabilities and its distributed nature. Bitcoin allows for transactions to occur directly from one person to another (peer-to-peer) without needing a middleman (a bank). Say for example I want to transfer you $100. That involves transferring money from my bank account to your bank account. If we have the same bank account, sure we could use the bank’s system of transferring, but that is a lot of infrastructure and requires everyone to be on the same bank account. And why do we need a bank in the first place. If I was giving you cash, I would simply hand it to you. Bitcoin allows me to give you money, electronically, where ever you may be, the same way I would give you cash. I don’t need a bank.
Bitcoin is distributed. Meaning I can give any single person any where in the world money without needing a bank to facilitate the transaction. What happens is I transfer my dollars into Bitcoin, send you Bitcoin, and you transfer it to your currency. This happens near instantaneous. We don’t need to worry about the value of Bitcoin itself because we are only using it to transfer currencies, not invest in Bitcoin. The infrastructure to do this using banks sucks. Fees and legality are the biggest obstacles. Now what tool would faciliate this transaction? Mobile.
Mobile computing is incredible. Google is creating a sub $100 Nexus phone. Mozilla is building a $30 one. Mobile phones (or tablets) allow for anyone with the device and an internet connection to access the worlds repository of information. There can be an entire book written on the potentials of it, the biggest benefit being education. At the Google I/O conference, Sundar Pichai pointed out Google’s goal for the next android billion users. India, China, Brazil, South American countries, Asian countries. The poorest areas in the world are receiving cheap smart phones, and they are only getting cheaper. This gives every indivual incredible power.
If money circulates freely within the tribe, the tribe will grow prosperous more quickly. I give you some money to buy seeds, your farm flourishes, and now we both have money to give to someone else to invest. The faster the money circulates, the better the tribe does. The alternative is a tribe of hoarders, with most people struggling to find enough resources to improve productivity. When I make an interest-free loan to you, I’m trusting you and giving you a gift at the same time. This interaction increases the quality of our bond and strengthens the community. Just as you wouldn’t charge your husband interest on a loan, you don’t charge a tribe member. — Seth Godin
So lets go back to our original question. What happens when you combine Microfinance, Bitcoin, and Mobile? Incredible power for communities to grow. Giving people the ability to exchange money without any need of infrastructure is huge. Bitcoin and Mobile are distributed, meaning anyone in the world can do it and it requires to central operating system. Provide the platform (via a mobile application) where microfinance investments can be managed by the individual/community and you have created a shift in the way communities, and by extension the world, develops. The the multiplier effect at its most basic form. As a good friend of mine says, “when one of us gets rich, it should make the rest richer. The richer we get as a society, the richer we should become.”
Bitcoin will do the money what the internet did for communication. Money is the bloodline of the world. It makes it operate. If the money that runs the world becomes decentralized, then it truly creates a free market and freedom for those within the economy to do incredible things.
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