Blockchain, tokenisation and financial inclusion

I recently helped found the Web3 Marketing Association. Its objective is to inform, educate and inspire the marketing community about the opportunities of Web3 technology.


The potential for Web3 to enable financial inclusion in populations is tremendous

I am constantly looking for examples that demonstrate the tangible benefits of Web3 to help in that mission. I am also interested in financial inclusion and was curious to understand what happens when Web3 and financial inclusion collide.

I recently had a fascinating conversation with Raymond Asfour, CEO and founder of Expectation State, about this topic. Expectation State works with governments, investors, donors, intermediaries, family offices, start-ups, multinationals and communities to deliver inclusive growth in the markets and regions where they operate.

Its goal is to support the growth of inclusive economies responsive to their populations’ needs, prioritising approaches that pursue quality growth, not just growth for growth’s sake. In practical terms, this means challenging traditional narratives and approaches to growth and development and bringing diverse partners, actors and ideas together to change the status quo.

Raymond and the team at Expectation State believe that aspects of Web3 offer tremendous scope for inclusion. One of the promises of Web3 is decentralised finance (DeFi), which Investopedia defines as:

“An emerging financial technology based on secure distributed ledgers similar to those used by cryptocurrencies. The system removes the control banks and institutions have on money, financial products and financial services.”

Some of the benefits of DeFi include:

  • The elimination of fees that banks and other financial companies charge for using their services.
  • Access to all (as long as you have an internet connection).
  • The transfer of funds in seconds and minutes.

Another promise is tokenisation and blockchain, which facilitate the division of assets in a way that was not previously achievable and a ledger of ownership of those assets. Taking these promises, Expectation State has been looking at frontier markets such as Jordan and considering ways to engage the population with the alternative finance industry.

Jordan has a thriving start-up community, but often a barrier to growth for many of these small companies is access to funding. Raymond and the team believe it is possible to use tokenisation and blockchain to enable ordinary people to invest in local start-ups.

Tokenising a start-up involves creating and selling digital representations of ownership. The use of blockchain enables automation of a large part of this process, reducing the costs associated with individual investment and making smaller investments viable. The mechanism typically used is the Security Token Offering – essentially a regulated public offering of these assets – that has grown to become a $20 billion industry in over a dozen mature economies worldwide.

Tokenisation and digital trading platforms, or ‘virtual asset trading platforms’, go hand-in-hand. They complement existing financing options and broaden those available to start-ups and SMEs. Often blockchain-based, a digital trading platform in a frontier economy would allow smartphone-wielding everyday citizens, both inside and outside of a market, to access and invest in investments that otherwise would have been out of their reach. At the same time, new and existing businesses could better access the capital they need to grow.

There is an argument to say that this sort of innovative approach is best left to more mature markets, but Expectation State believes the opposite. Markets such as Jordan, with its burgeoning start-up sector, need it more and need it faster to unleash the potential of Jordanian youth by unlocking capital.

Expectation State is really on to something; Web3 is “eating the world” and providing opportunities for inclusion for populations that have traditionally sat outside the financial system.

Recently, Nigeria has emerged as a Web3 superpower. According to the BBC, of the top 10 countries for trading volumes, Nigeria ranked third after the US and Russia in 2020. And according to a post by Kabir Abdulsalam, 60% of Nigerian start-ups have a focus on blockchain.

Returning to Jordan, it has the right ingredients for connecting retail investors with start-ups through Web3. Jordan’s access to finance is further advanced than many of its neighbours; it hosts venture capital funds and crowdfunding platforms and is one of the first countries in the region to implement a regulatory sandbox to advance innovation in the alternative finance and fintech sectors. Yet, a bold step into blockchain-enabled retail investment is no small endeavour. Innovators need to work together with institutions that often move less quickly.

Regulators, central banks and governments all play roles in creating healthy, safe and stable economies, but they must increasingly look towards innovation. In some countries, that is happening right now.

Oman has launched a blockchain-based crowdfunding platform, and the government of Ethiopia is tracking the educational attainment of five million students using blockchain. Nigeria launched its e-Naira in late 2021, and Morocco, Tunisia, Ghana, Kenya, Uganda, Rwanda, Madagascar and Mauritius are all examining the feasibility of digital currencies backed by their respective central banks.

The potential for Web3 to enable inclusion in populations is tremendous. However, change entails risk, particularly in countries where the reform can be slow and contentious. Nevertheless, through harnessing innovation and entrepreneurship, blockchain, tokenisation and DeFi have the potential to change existing dynamics and paradigms, reducing inequalities while providing oxygen to the private sector in the countries that need it most.

About the author

Dave Wallace is a user experience and marketing professional who has spent the last 25 years helping financial services companies design, launch and evolve digital customer experiences.

He is a passionate customer advocate and champion and a successful entrepreneur. 

Follow him on Twitter at @davejvwallace and connect with him on LinkedIn.

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