Developing countries present a huge opportunity which is hidden under veil of a problem in the form of the underbanked. Burma is one such emerging economy. In such countries providing banking services to those who have been the most ignored by mainstream economy can bring about significant benefits.
In neighbouring Bangladesh, microfinance has been hailed as a great success and nearly 700 microfinance institutions are operational which have been disbursing Bangladesh Taka 647 billion to nearly 34 million active borrowers according to the think tank, Copenhagen Consensus.
Burma as an emerging fintech landscape
According to the Consultative Group to Assist the Poor (CGAP), the demand for microfinance in Burma is four times the current supply and is one of the reasons why the country is finding it hard to develop as it becomes more open. It is, therefore, of vital importance that microfinance institutions in Burma receive support in the form of technological assistance and otherwise.
Recently Infoteria Corporation and the Tech Bureau Corporation of Japan have been working with BC Finance Holdings Limited on experiments which are based on Tech Bureau’s Mijin Platform. Mijin is a private Blockchain placed on Microsoft Azure using ASTERIA WARP and Mijin adapters.
Using this technology Infoteria and Techbureau have been successful in transferring loan and deposit account data in the main system of Burma’s BC finance. This demonstration was carried out between May 28 and June 5, 2016.
The experiment was successfully conducted as Infoteria and Techbureau could record all the transaction history of one of the 19 branches of BC Finance in the private Blockchain Mijin.
We asked Jeremy Kloiser-Jones, Founder and CEO of BC Finance Holdings Limited, about the successful test of Blockchain technology in a microfinance environment.
“This test represents an internal application of Blockchain technology running against our core banking system. All indications are that this test is proceeding well. Naturally, we then look forward to Mijin supporting a new type of core banking system. We are glad to provide input from the user’s perspective and aid the development of this. Concurrently, we have plans to apply Blockchain elsewhere as a base or component of various services - one of which will be announced in the coming weeks. We are focused on practical applications.”
Developing markets can benefit from Fintech innovations
At the moment even in Burma the fintech landscape is rather limited. However, there are possibilities that are emerging due to the country embracing openness.
Mobile penetration has increased from 10 per cent four years ago, to 50 per cent at the moment. Mobile penetration can act as an important delivery channel for microfinance companies.
The Burmese economy is now growing at the rate of 8.5 per cent p.a. And, thus, there is a need for more of everything according to Jeremy Kloiser-Jones of BC Finance.
Takao Asayama, CEO of Tech Bureau Corp, whose platform is being used by BC Finance has his own take on developing countries and the potential Fintech applications. He thinks that most developing countries, including Burma, have been using legacy technologies to run their operations. He cites the example of BC Finance who uses Excel spreadsheets to manage loans and then pushes those to a database daily. He thinks to upgrade that to an enterprise financial system could cost millions of dollars and may need reliable system integrators from overseas.
Using Blockchain things can be relatively simpler.
“However, with a Blockchain, they can build a ledger system that can handle all transactions with digital signatures, and the data cannot be manipulated at all. Blockchain will solve the problems of developing countries to easily compress their budgets down to, say, 1/10 or 1/100. Also, microfinance is a aggregation of very small transactions, which can be summed up to a large chunk of fee using the existing banking infrastructure. Blockchain can potentially eliminate those fees and bring better user experiences to microfinance.”
Developing countries may be easier to operate in
While developed countries may present an easier landscape to innovate, existing regulations make it difficult to get things off the ground in some cases. Developing countries in this way are more exciting for Fintech companies.
“Usually those developing countries have fewer hurdles and fewer rules when welcoming new technologies. There may be totally different rules which we have to overcome, but I can say that there is a better chance, compared to developed countries such as Japan, to implement Blockchain in their financial services. For example, Japan has FISC guidelines which forces banks to protect servers in a separated and isolated world, but Blockchain technology even allows servers run on the Internet, exposed to the public, without compromising its security levels. So, even when faced with political or cultural hurdles, developing countries have the chance to implement Blockchain much faster than others, even to compete with developed countries, I believe.”
The future of Techbureau, Infoteria and BC Finance experiment
That Blockchain technology has started to make a real impact on the lives of people in developing countries is a positive development. We asked both Jeremy Kloiser-Jones and Takao Asayama about the future possibilities of using their technology in developing nations.
Kloiser-Jones is of the view that there is a big future for this technology and he expects it to contribute greatly to BC Finance’s ability in providing flexible services to a broad audience of the underbanked. He says that they have started in Myanmar, but have a number of other countries in their sights for expansion.
Asayama plans to introduce ‘solid’ smart contracts concentrating on simple asset exchange instead of complex program language, which reduces the probability of errors and failures.
“After what we learned from The DAO, I am confident that such a simple ‘enterprise smart contract’ will be much more realistic, doable and practical since most of the executions and enforcements of contracts will happen off-chain anyway. Once we have that, Mijin will be a powerful tool that people can manage assets, transact, and contract each other. We are just looking towards the summer of 2016 to unleash the power of Mijin Blockchain.”
Japan has an edge in global fintech reach
The Japanese are making forays into global fintech and reaching out to other countries and this is quite evident from the case of Mijin.
As a software vendor hailing from Japan, Takao Asayama feels confident, saying:
“I am confident that our product Mijin is one of the few stable and production-ready platforms. And there are several cutting-edge system integrators, such as our partner Currency Port and our alliance partners such as Infoteria or GMO, who are almost ready to launch products which work with Mijin. I believe these small steps, arising from Japan, will allow a huge success of the Blockchain fintech alliance.”
Will the Japanese Ninja be able to take the world by surprise? Only time will tell.
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