THE IMPROVEMENT OF MSMES IDENTITY MANAGEMENT USING BLOCKCHAIN TECHNOLOGY
Introduction
Blockchain technology is well known for its tamper-proof nature. Since there is no central repository from which hackers can steal data, information stored on the blockchain is safe from data breaches that centralized databases frequently suffer from. Moreover, all transactions that happen between the identity holders and the companies are recorded on the blockchain, ensuring complete transparency.
Decentralized digital ledger technology also allows people the flexibility to create encrypted digital identities, which can be easily accessed through mobile applications, and be used to verify identity as and when required. This is a much more secure way as compared to carrying around traditional identity documents in wallets and bags. It’s no surprise that blockchain is being used in various identity management and verification in a wide variety of applications today, ranging from humanitarian efforts to financial sectors.
Identity verification has become an integral part of our daily lives today. Travelling abroad, purchasing a new car, buying a pint of beer — everything requires some sort of identity verification. Even opening a new Facebook account requires email authentication! Carrying around important documents might not always be feasible or even safe. On the other hand, once we provide any sort of data to any of these apps, we really have no idea how it might be used or abused. This is when the strict privacy control that blockchain provides comes into the picture.
FINANCIAL ASSISTANCE TO MSMES SECTOR
South-East Asian countries like Indonesia and Singapore are slated to become major players in the global economy within the next decade or so. A significant portion of their economies are made up of micro, small and medium scale enterprises, or MSMEs. Unfortunately, MSMEs are finding it extremely difficult to survive in the battle against large corporations today. Most of the MSMEs are located in rural sectors, and their owners do not possess proper legal documentation or long term credit history. This makes banks extremely reluctant to loan money to them. In fact, according to The World Bank, as much as 70% of MSMEs in emerging markets lack access to credit!
The MSME sector in Indonesia is crucial to its GDP. As per this 2018 report MSMEs here contribute towards 99% of all business and 89% of all private sector employment. The situation of MSMEs, sadly, remains as woeful as
elsewhere. However, there seems to be hope on the horizon, as different
institutions of the Indonesian government have recently signed partnerships with blockchain startup Tokoin. Based in Indonesia, Tokoin is creating an Ethereum-based digital platform to establish verifiable digital identities for these MSMEs.
MSMEs would first have to upload their basic KYC information on Tokoin’s platform, which would create digital identities for them on the Ethereum blockchain. Thereafter, every financial transaction that they are involved in would get associated with their digital identities on the blockchain. This would help establish verifiable and tamper-proof trust scores for these enterprises. Banks would be able to analyze these records and assess the credibility of these enterprises when it comes to providing loans. Third party vendors (such as warehouses, raw material suppliers, etc.) would also be able to access this data. Depending on their performance in Indonesia, Tokoin plans to extend their services to other South-East Asian countries in the near future.
OPPORTUNITY FOR BUSINESSES AND GOVERNMENTS
In fact, many blockchain solutions and applications are already perfectly feasible in the near term, and new opportunities will continue to present themselves as the underlying technology evolves. As the first popular blockchain solution, Bitcoin might get most of the attention, but cryptocurrencies are only the tip of the iceberg when it comes to innovative potential.
Insurance company, banks and credit providers already have their eyes on blockchain to speed up the application process and safeguard their clients’ data. In the fast-moving consumer goods industry, the technology can help trace ingredients from source to table, giving consumers valuable peace of mind that their food was produced ethically and in an environmentally responsible manner.
Blockchain is even providing new ways to deal with various humanitarian crises around the world. ID2020 aims to provide digital identities to the 1.1 billion people who currently live without officially recognized identification, helping to give them access to essential public services and address basic human needs that are currently left unmet.
Conclusion
The key consideration in all of this is not to focus on the technology. Blockchain is not a totem for progress and treating it as such will not bring the desired results. Rather, the focus needs to be on solving business challenges. The approach to blockchain should be part of a wider toolkit of technology that serves as part of a potential solution to the problems you face in your business operations. Or even better: as a solution to the problems your clients encounter. And while we are still heavily relying on the traditional methods of identity management, every small step that a Tokoin or other blockchain institutionalized platforms takes is a big step towards blockchain adoption
For more information:
Website: https://tokoin.io
Whitepaper: https://www.tokoin.io/whitepaper/Whitepaper.pdf?id=05f5c9d62d22ae24ea82
Telegram Chat: http://t.me/tokoinglobal
Twitter: https://twitter.com/TokoinOfficial
Facebook: https://www.facebook.com/TokoinOfficial
Medium: https://medium.com/@tokoin
Instagram: https://www.instagram.com/tokoinofficial
Linkedin: https://www.linkedin.com/company/tokoinofficial
