Decentralizing Grameen Microcredit: Shanzhai City to launch new blockchain driven microcredit business unit with Grameen to solve urban poverty in Hong Kong
Nobel Laureate Professor Muhammad Yunus (Founder of Grameen Bank), Dr. Tat Lam (founder and CEO of Shanzhai City) and Mr. Gao Zhan (Founder of Grameen China) recently met at Grameen Trust in Bangladesh to discuss how next-generation technologies can help microcredit to proliferate across East Asia and Southeast Asia.
Shanzhai City has been creating decentralized social finance solutions across Southeast Asia and South America based on the iO₂ blockchain protocol, and will be formally partnering with Grameen China to establish the Grameen model of microcredits on blockchain starting in Hong Kong, then offering services to its partners in Southeast Asia, and potentially China as well.
Grameen Bank has long since been one of the world’s foremost founding pioneers in the profoundly successfully and impactful field of micro finance for the poor — a model that has been replicated across the world to help bridge financial gaps where other institutions cannot provide, and alleviating poverty not only through offering credit, but by activating community-driven support towards financial literacy, well-being, and collective action.
The key to the success of Grameen’s model is the role of group-loan behaviour: where loans are distributed to groups of 50 community members instead of individuals, making repayment on the onus of an entire group in lieu of any physical collateral, allowing self-governance of group-behaviour to evolve and self-regulate over the course of its regular weekly group meetings, which results in one of the highest repayment rates of any loan type in the world; a remarkable 99%, with less than 1% in default.
Because the current process of group self-governance uses analog consensus-based financial decision making and crowd-intelligence to influence individual behaviours within groups, the Grameen microcredits model naturally lends itself to using a distributed ledger that allows consensus-based behaviours and decisions to be updated onto the ledger more accessibly, rapidly, and globally within each group. Shanzhai City, supported and partnered with Grameen China, will launch a new business entity in Hong Kong, authotized by Grameen Trust to replicate Grameen methodology, which will deploy prototypes of the microcredit model with incremental integrations of cloud-based and blockchain-based technologies that can be accessible on personal smart devices, which are ubiquitously common digital tools across poor communities in Hong Kong as well as in developing communities across Southeast Asia.
Hong Kong will pioneer a new model for the Grameen methodology, not only because it will be deployed within a major city that is definitively hypermodern, but also because it will be leveraging blockchain to onboard a wider range of new users more easily, grant constant access to commit claims on the distributed ledger, and to augment community-driven consensus-based decisions, with the aim of scaling the effects of poverty alleviation beyond its analog forerunner.
Hong Kong is a unique matrix of socio-economically diverse demographics, whether from within the solidly dense urban centre, to sparsely populated developing rural regions at the fringes of the city, there exists extreme poverty where 1 in 5 citizens live beneath the poverty line, in the face of being one of the top financial centres of the world, with 1.377 million of its 7.392 million residents living in poverty in 2017, which grew by over 25,000 more than the year previous (Hong Kong Poverty Situation Report 2017).
At the same time in Hong Kong, Shanzhai City is working with Hong Kong Council of Social Service (HKCSS), HKU Sustainability Development Lab, a handful of time voucher NGOs across all districts in Hong Kong and the greater non-profit community to launch blockchain for time “banking”. While in Southeast Asia, the team will also be building off their earlier works developing decentralized social finance solutions in Southeast Asia, such as their earlier works in Myanmar having deployed the world’s first micro social impact bond on blockchain in Fall 2018, and will soon be deploying agricultural production loans to impoverished coffee farming communities in Papua New Guinea that will use blockchain to both increase local liquidity with community tokens backed by the future values of coffee yield sales, while hedging foreign currency exchange risk.
In each network of both lenders and beneficiaries will begin to build a range of blockchain-based social finance services that can help people in poverty access loans without any collateral, and eventually graduating them up towards becoming entrepreneurs where they begin digitally assetizing collateral on blockchain for access to higher levels of decentralized financial products and services.
