{{This article was originally posted on December 23,2016. After loosing and retrieving it here it is posted again.}}
I was (still am) fascinated by how micro-financing works, specially they social insurance and social credit system. I got hands on, in the field sessions with 2 micro-finance Organizations (MFI), Chimek Bikas Bank and Jeewan Bikas Sanstha, is regards to some work that I was working with them on. During these trips I was able to see how the credit was provided for individuals as being part of a group (social credit). This created a little bit of restrictions in that the person needed to be known and was bound geographically.
With the blockchain revolution I thought that the micro-finance’s social credit could be taken online. But I see one issue, the initial credit that needs to be provided for one to become known to a social unit. In the current scenario that is being done by physically being known among someone in the group. The analogy does not look possible to replicate in blockchains.
So I have been thinking maybe an initial credit rating of a person should be done that could then be used to continue forward in the blockchain. As the person does not have any collateral or even a social network to show, we might need to be imaginative in doing this credit rating.
The initial credit should be :
Profile + weighting factors
where Profile :
Personal Income level
Household Income level
Mouths to feed
Potential of income in near future
Land
Business
Vehicles
Any terminal illness (I feel this needs to be there, but am not comfortable as it marginalizes)
Weighting Factors:
How long has someone stayed in the current place?
How many times has someone moved locations so far in life?
Current family members vs members outside (within Nepal and outside)
Own land location
Own home location
Current field size VS soil type in that region
Current animals VS national requirements for those animals
Personal education vs district education
Personal income vs district income
Animals possessed
Variety of animal vs animal requirement of district and country
As all financial facilities go, there cannot be an access to major funds right a the beginning. Credit has to be built. There always needs a starting point. So making initial credit rating is starting point. Incremental building of credit rating by honoring the guarantees — this will allow to develop trust over a period of time.
Individuals would try to get into the blockchain so that they have a credit rating and social guarantee to be eligible for loans and other financial transactions. Banks and other institutions could look into the blockchain as a way to make informed decisions regarding particular person.
In this case not having anything on the blockchain would be penalizing for the potential user. So incentive to put everything there could be rewarding enough for the motivation to just do it.
Note : when I discussed this with my friend, Lewis Kaneshiro, he deeply feels that putting a person’s information in blockchain itself seems not like a good idea as it puts someone’s entire life into a permanent storage that people can query into way past the person. Looking at it from that perspective I left this thought as a thought only and didn’t do a binge on.