Blockchain for sustainable development: The case of Ghana

The rise of digital technology and rapid globalization has made cryptocurrency usage a common phenomenon. Blockchain technology opens up the internet for financial services. It replaces trust, which has been a key component of the financial system over centuries. Transparency is integrated into a decentralized network. Blockchain has the potential to enable the UN’s Sustainable Development Goals (SDGs) by providing liquidity and transparency, as well as reducing transaction fees.

In 2021, only 57.7% had a bank account. The poor pay the highest for basic financial services because they cannot afford to participate in the formal financial system. A multiplier effect is also inherent in the economic participation and financial services of women, which has wide-ranging implications for a variety of SDGs.

Related: Blockchain is essential for the UN’s “decade of delivery” success

Financial inclusion can reduce poverty, increase health and well-being, enhance gender equality, have a positive impact on education for children, and many other benefits. The availability of affordable financial services can be a catalyst for economic growth. This is simply because there are a lot of stakes. Let’s get into it.

Ghana is the economic powerhouse of West Africa:

Ghana is located in central West Africa, bordering Burkina Faso, Togo and the Ivory Coast. There are 32 million people in Ghana. English is also one of the most widely recognized national languages. The country is often referred to as West Africa’s economic powerhouse. In 2020, its purchasing power parity (gross national product per capita) was $5,744 United States Dollars. Ghana’s remarkable economic growth was the best example of what other countries in the region should strive for, up until it was struck by a serious banking crisis that spanned from 2017 to 2020. The economy is currently in recovery, despite being hit by yet another crisis.

Ghana’s wealthiest remain in the urban areas of the south, with lower-income households scattered across rural Ghana, which is home to the majority of the country’s population. Bank services are concentrated in urban areas. A 2010 study found that physical access to banks does not constitute the main barrier to banking. Instead, Know Your Customer (KYC), requirements are what many people who aren’t banked cannot meet. 64% also stated that insufficient income was the main reason they didn’t have a bank account. Although the study is old, another study in 2021 found similar results. It revealed that the main obstacle to opening a bank account is the lack of financial resources.

Mobile money is an essential part of Ghana’s financial infrastructure. In fact, 38.9% of Ghanaians had registered mobile money accounts in 2021. Mobile money was introduced in 2009. It allows people to make and receive money without having to have a bank account. A mobile phone that can send SMS is all you need to complete a transaction.

Mobile money is available to account holders depending on their network provider. It allows them to access credit, as well as other financial products. Mobile money has the additional advantage of having a lower KYC requirement than banks. To open an account, one usually only needs to provide proof of identity. This may seem like a barrier to financial inclusion. Not everyone has a phone, or identification documents. However, it is the lowest possible barrier. Transaction and withdrawal fees are two of the disadvantages. MTN charges mobile money transfers of up to 5%, for instance. Although they may not seem significant, these charges add up over time.

Similar: What’s Happening in Web3 Africa

The Ghanaian government announced on November 17, 2021 that an e-transaction tax of 1.75% would be enacted. This was to fund state coffers. Although originally planned to be in place by February, fierce opposition has kept the e-levy from becoming law. However, it has been stated that most people will continue to use mobile money regardless of the electronic tax.

When discussing the financial services situation in Ghana, it is important to mention foreign remittances. Remittances account for a significant portion of Ghana’s GDP. This is similar to what happens in many developing countries.

After Nigeria, Ghana was the second largest recipient of remittances from West Africa in 2018. Many households depend on remittances to survive, as more Ghanaians are moving to Europe and North America. Money transfer services, which deliver money to a bank or cash pickup location, are often the least expensive option for international transactions.

Cross-border transactions are more competitive than cryptocurrency. Because there are fewer intermediaries, international money transfers via blockchain can be cheaper and more efficient than traditional methods. According to the World Bank, the average cost of sending $200 was 6.8% during the third quarter 2020. Facilitating international remittances was a key factor in El Salvador’s decision to launch Bitcoin as a legal currency in September 2021. SDGs recognize that substantial costs of remittances are a barrier to financial inclusion. They have therefore set the goal of reducing them by 3% by 2030.

Similar: Banks, policymakers and NGOs are not needed in the world

Blockchain for sustainable development

Blockchain’s characteristics of being incorruptible, void of intermediaries and other benefits may allow it to serve the unbanked better. This could lead to diversification in the financial services market that has been dominated historically by banks. Blockchain-based cryptocurrency could be able to do everything that banks can, without having to delve into technical gobbledygook. However, it does not require a third party to control user data or charge people outrageous fees for basic services.

It has yet to be widely adopted by consumers despite all the great things that crypto can do. This is more than 10 years since the initial Bitcoin (BTC) was created. The findings of quantitative surveys with residents of the Greater Accra Region (the country’s most urbanized and home to its capital city) show a lack trust in cryptocurrency’s future. It is impossible to know for certain. However, these findings indicated that cryptocurrencies have a great chance to gain momentum and enrich the financial market. This is especially true if they are easier to use, more stable and can be accepted by shops for daily purchases.

According to other surveys, it appears that many people don’t have the necessary knowledge to conduct cryptocurrency transactions. It takes a lot of time to understand it.

Related: Latin Americans can be financially empowered by crypto education

Trust thrives on ignorance that hinders crypto’s adoption. The dehumanizing portrayal of this financial tool by many media outlets is not helpful either. This vicious circle cannot be broken unless both shop owners and individuals have easy access to financial services. This cycle could be broken if there is a platform that allows one to transfer funds via SMS. It’s based on an infrastructure that many Ghanaians know well. There are companies that offer SMS-based blockchain transactions. This does not replace other financial tools but it will diversify the sector and include people who were previously excluded.

It is worth noting at this point that fluctuation in cryptocurrency prices can be overcome using stablecoins. These are cryptocurrencies that have been pegged to fiat (government-issued currencies) or precious metals. Although critics will be quick to point out that these coins are not decentralized, as they are tied to fiat, their value is heavily dependent on the performance and stability of the currency they are mirroring. Some crypto companies have managed to create stablecoins that are relatively decentralized, such as MakerDAO’s Dai.

More than 70 countries are working to establish a digital equivalent of national currencies. The central bank digital currencies (CBDC) are digital equivalents of national currencies that central banks give out. This could increase consumer protections as well as spark a regulatory framework. It would include fiscal and monetary policies for a large part of the financial sector, which has so far been largely ignored by authorities. There are some drawbacks. Users would need to give up some privacy and control. However, central banks would have unprecedented power to date back transactions and make them undone. — the “tamperproof” nature of decentralized finance. This is a great opportunity for an authoritarian model government to strengthen its control over financial transactions and citizens. The cryptocurrency and blockchain could be used for dystopian outcomes or freedom.

CBDCs, when combined with a user-friendly platform, could provide a simple infrastructure to kickstart crypto. This could allow people to learn more about cryptocurrency and be empowered. People may be encouraged to explore the crypto-world, increase their financial literacy, and shift savings to decentralized solutions.

Learnings from El Salvador may help to propel financial inclusion via crypto in other regions of the globe. Although this article is not meant to cover all of the arguments surrounding CBDCs, it may be a way to incite financial inclusion and generate trust as well as incite the adoption of cryptocurrency. Recognizing the enormous potential of cryptocurrency, it is likely to become more relevant. It is not the time required for cryptocurrency to gain momentum that worries me. Many of those in power have a vested desire to keep things as they are. Looking back at history, I believe its adoption will be faster than the transition from cowrie shells into fiat.

Another time, let’s talk about inclusion

Blockchain and cryptocurrency offer a better alternative to traditional financial services by offering a more fair and transparent financial system. It is crucial to recognize cryptocurrency and blockchain as financial inclusion, and to look beyond traditional banking infrastructures and mobile money to cater to people’s desire for affordable financial services. To facilitate both individual and business usage, a user-friendly platform must be created. This platform allows anyone to access the benefits of blockchain without having to be an expert in it. Crypto could be accepted by stores, which would encourage financial inclusion as part of the U.N. Sustainable Development Goals. Financial education and regulatory frameworks are important in tackling financial exclusion.

It becomes clear that blockchain is threatening to replace the very nature and integrity of the financial system, bypassing trust issues. The article was too brief to cover all aspects of blockchain. This includes custodial and notcustodial wallets as well as decentralized and centralized exchanges. There are many types of blockchains, cryptos and consensus mechanisms. However, I encourage everyone to explore these concepts (“googling”) and others. Although it can be tedious, I have spent considerable time researching this topic and can tell you that it is both a stimulating and educational endeavor. It’s a great time to get started reading about blockchain, as it is still very much in its infancy.

This article is not intended to provide investment advice. Every trade and investment involves risk. Readers should do their research before making any decision.
These views, thoughts, and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.
Dustin Jung is a blockchain enthusiast. He has two master’s degrees from the University of Freiburg, International Business School Budapest and University of Buckingham in management and social science. Dustin, who lived in Ghana between 2018 and 2019, quickly discovered the potential of blockchain to drive sustainable development in developing nations.

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Eileen Wilson

Eileen Wilson –Technology and Energy My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.

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