Kotani Pay: Can Blockchain Reduce Poverty? – The Borgen Project

Report on Blockchain Technology’s Role in Advancing Financial Inclusion and the Sustainable Development Goals

Introduction: Financial Exclusion as a Barrier to Sustainable Development

A significant portion of the population in developing nations lacks access to fundamental financial services, a reality that impedes progress toward the Sustainable Development Goals (SDGs). The requirement of internet connectivity and smartphones for mobile banking creates a substantial barrier for low-income communities, limiting their economic participation. In sub-Saharan Africa, 51% of adults remain unbanked, relying on cash transactions without secure means for savings or transfers. This financial exclusion directly obstructs the achievement of several SDGs, most notably SDG 1 (No Poverty) and SDG 10 (Reduced Inequalities).

Innovative technological solutions are emerging to address this gap. Blockchain technology, through platforms like Kotani Pay, offers a pathway to financial inclusion by providing secure, transparent, and low-cost services that do not depend on traditional infrastructure, thereby accelerating progress on the 2030 Agenda for Sustainable Development.

Blockchain Technology: A Framework for Inclusive Economic Growth

Core Functionality and Benefits

Blockchain is a decentralized and immutable digital ledger that records transactions across a distributed network, eliminating the need for traditional intermediaries like banks. This structure provides inherent security and transparency, enabling faster and more efficient transactions at a lower cost.

• Security and Transparency: Transactions are permanently recorded and verifiable without a central authority, fostering trust and accountability, which aligns with SDG 16 (Peace, Justice, and Strong Institutions).
• Reduced Costs: By minimizing intermediary fees, blockchain makes financial services more affordable, directly supporting SDG 1 (No Poverty) by allowing individuals to retain more of their capital.
• Global Accessibility: The technology facilitates cross-border payments, empowering underserved populations to participate in the global economy, a key component of SDG 8 (Decent Work and Economic Growth) and SDG 10 (Reduced Inequalities).

Adapting Technology to Local Needs for SDG Advancement

To be effective, financial systems must adapt to local conditions. Many potential users in rural Africa lack consistent internet access or smartphones. Blockchain platforms that integrate with existing, accessible technologies like Unstructured Supplementary Service Data (USSD) can extend financial services to previously excluded populations. Furthermore, the use of stablecoins—digital currencies pegged to stable assets like the U.S. dollar—protects low-income individuals from currency volatility, promoting the financial stability necessary for achieving SDG 1.

Case Study: Kotani Pay and its Impact on the SDGs

Operational Model

Kotani Pay, a Kenyan startup, exemplifies the application of blockchain to advance the SDGs. The platform leverages USSD technology, allowing users to access financial services without an internet connection or a traditional bank account. By dialing a simple code, users can perform essential financial activities.

1. Send and receive funds securely.
2. Convert digital assets (stablecoins like Celo Dollars) into local currency.
3. Participate in economic empowerment programs, such as Universal Basic Income (UBI).

This model directly addresses the infrastructure gap, a critical target under SDG 9 (Industry, Innovation, and Infrastructure), by building an inclusive financial system on accessible technology.

Measurable Contributions to Sustainable Development

Since its inception, Kotani Pay has reached over 15,000 beneficiaries, including refugees, gig workers, and rural farmers. Its impact is directly correlated with progress on several SDGs:

• SDG 1 (No Poverty): By providing secure savings and transaction tools, Kotani Pay empowers individuals to build financial resilience, invest in small businesses, and escape the poverty cycle.
• SDG 8 (Decent Work and Economic Growth): The platform enables gig workers and farmers to receive payments efficiently and securely, fostering entrepreneurship and promoting inclusive economic growth.
• SDG 10 (Reduced Inequalities): By focusing on underserved communities, including refugees who face extreme barriers to financial access, the service directly reduces economic inequality.

Conclusion: The Future of Blockchain for Global Goals

Blockchain technology, as demonstrated by Kotani Pay, presents a powerful tool for advancing financial inclusion and, consequently, the Sustainable Development Goals. While not a singular solution, its potential for scalability in reducing global poverty is immense. The primary challenge remains the navigation of complex and varied regulatory landscapes across different countries. The successful implementation of inclusive and affordable solutions by governments, innovators, and communities will be critical to harnessing this technology’s full potential. By providing secure, low-cost, and accessible financial instruments, blockchain platforms are instrumental in helping marginalized communities participate in the global economy and build a more sustainable future.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 1: No Poverty: The article directly links financial inclusion to poverty alleviation, stating that providing access to financial tools helps individuals save, invest, and receive support, ultimately contributing to poverty reduction.
• SDG 8: Decent Work and Economic Growth: By enabling access to financial services for gig workers, rural farmers, and aspiring entrepreneurs, the platform helps people “start small businesses” and “engage with the economy,” fostering inclusive economic growth.
• SDG 9: Industry, Innovation, and Infrastructure: The article focuses on an innovative technological solution (blockchain and USSD-based platforms like Kotani Pay) to overcome infrastructure barriers like the lack of internet and traditional banks, thereby building a new kind of accessible financial infrastructure.
• SDG 10: Reduced Inequalities: The initiative specifically targets “low-income communities,” “underserved populations,” “refugees,” and the “unbanked” to reduce the financial inequality gap. It also addresses the high cost of cross-border remittances, which disproportionately affects migrants and their families.

2. What specific targets under those SDGs can be identified based on the article’s content?

• Under SDG 1 (No Poverty):
  • Target 1.4: “By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to… appropriate new technology and financial services, including microfinance.” The article’s entire premise is about using new technology (blockchain, USSD) to provide financial services to the poor and vulnerable who lack access.
• Under SDG 8 (Decent Work and Economic Growth):
  • Target 8.10: “Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all.” Kotani Pay acts as an alternative financial service provider, expanding access to financial tools for populations traditionally excluded from formal banking systems.
• Under SDG 9 (Industry, Innovation, and Infrastructure):
  • Target 9.c: “Significantly increase access to information and communications technology and strive to provide universal and affordable access to the Internet in least developed countries.” While Kotani Pay works around the lack of internet, it is an innovation in communications technology designed to bridge the digital divide in financial services. The problem it solves—lack of internet access—is central to this target.
• Under SDG 10 (Reduced Inequalities):
  • Target 10.2: “By 2030, empower and promote the social, economic and political inclusion of all…” The article highlights how Kotani Pay empowers and promotes the economic inclusion of marginalized groups like refugees, rural farmers, and the unbanked.
  • Target 10.c: “By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent.” The article explicitly mentions that Kotani Pay addresses “the typically high fees for cross-border transactions,” which directly aligns with this target of reducing remittance costs.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• For Target 1.4 and 8.10:
  • Indicator (Implied by SDG 8.10.2): Proportion of adults with an account at a bank or other financial institution or with a mobile-money-service provider. The article provides a baseline statistic: “51% of adults in sub-Saharan Africa are without a bank account.” Progress can be measured by the reduction of this percentage.
  • Indicator (Mentioned): Number of beneficiaries gaining access to financial services. The article states, “Kotani Pay has reached more than 15,000 beneficiaries,” which serves as a direct measure of the platform’s reach and impact.
• For Target 10.c:
  • Indicator (Implied): Transaction costs of remittances. The article mentions that the platform corrects “high fees for cross-border transactions.” An implied indicator would be the average cost of sending remittances through the service compared to traditional channels.

4. Summary Table of SDGs, Targets, and Indicators

Source: borgenproject.org