Over 300 million small and micro-businesses in developing countries have limited access to formal financial channels, most of them have low and unpredictable incomes and lack the resources to cope with unexpected needs. Often, the only way to access funding is via informal lenders, who charge extremely high interest rates.
In communities where money is scarce, informal credit is often used to avoid having to borrow from informal lenders. Informal credit means using IOUs (“I owe you” a written promise to pay back money owed), or promises of payment, instead of cash. This does decrease the need for cash but has some drawbacks: no legal recognition, the inability to transact outside of one’s trusted network and lack of a verifiable audit trail.
We use the power of technology to leverage existing trust relationships, boost local economies, and reduce dependence on the banking system.
Sikoba developed a blockchain-based system for registering, tracking and clearing debt which helps to overcome the limitations of informal credit. Its mobile app is called SikobaPay.
As debt is registered on Sikoba blockchain, it gives users legal certainty for their transactions and adds an additional level of accountability and security for all parties. Using the concept of credit conversion enables transactions between users who do not fully trust each other, making payments via trusted intermediaries possible.
All SikobaPay users will also benefit from the ongoing clearing of debt, as its advanced algorithm looks for clearing cycles and reduces circular debt as much as possible. As a result, the need for cash settlements is reduced to a minimum.
Based on the tried and trusted concept of promises of payments SikobaPay provides the technology to manage such IOUs with maximum efficiency. SikobaPay can be used in a wide range of situations where there is a need to overcome money scarcity, or a desire to reduce money dependency. It can benefit small business networks, be used for local currency projects as well as by NGOs for direct giving and basic income programs. Another application is the distribution of funds/credits in refugee camps. Sikoba has already signed its first commercial contract with the local currency in Luxembourg and found partners in the Philippines, Kenya, Colombia and Pakistan.
Instead of giving alms to the poor, Sikoba provides a tool to boost their businesses without external help. Adoption of Sikoba and of the SikobaPay mobile app will allow unbanked businesses and individuals to establish a credit history, which can then become a basis for an online digital identity as well as financial inclusion.
Sikoba is the result of my life-long interest in monetary theory. I see a future where money will once again be diverse, with many different issuers.
Alex Kampa, the founder of Sikoba, affirmed that the company help with a variety of credit relationships, where people will take an active interest in the type of money they wish to use. The aim is to provide the tools to achieve that vision. His aim is to re-establish peer-to-peer credit to its rightful place in the financial system, alongside bank money.
