For Kosta Peric, overcoming finance’s last mile means looking for ways to do so from the ground up.
As deputy director of the Financial Services for the Poor initiative for the Bill & Melinda Gates Foundation, Peric is the forefront of the organization’s efforts to build what he calls a digital financial system that, if successful, would connect everyone to financial services.
Inclusion isn’t simply a matter of opening the door to products such as microloans or insurance policies geared toward low-income families and individuals, he said in a new interview with CoinDesk. Rather, inclusion means creating channels of financial support during times when people need it the most.
“These include challenging shocks like debts, death in the family or some expense that has to be taken care of,” Peric said. “Having access to an affordable and secure, reliable financial system is very important.”
As part of its efforts, the Gates Foundation is working in a number of African and Asian countries to foster the development of digital money systems, with the overarching goal of building interconnected webs of finance that enable poor households to connect with the wider global financial system.
It’s within this context that Peric and others at the Foundation see the blockchain playing a powerful role.
He told CoinDesk:
“The very powerful thing about bitcoin in general and specially the technologies behind it, is they are essentially leapfrogging all the technology and providing a new system for processing these huge amounts of transactions for very small costs.”
The organization recently published materials for the Level One Project, an umbrella initiative for the Foundation’s various development projects around the world.
The goal, according to Peric, is to spur local private stakeholders, government agencies and everyday people to support the creation of interoperable financial pipelines.
New channels for old problems
As part of its broad research efforts, the Foundation has looked closely at how blockchain technology can be implemented to make such networks fast, simple and secure – characteristics that Peric said would align it with existing money systems like M-Pesa in Kenya and bKash in Bangladesh.
As outlined on the Level One Project website, the blockchain, within the context of the Foundation’s work, could theoretically be used to provide a crucial means of settlement between payment systems being established in developing economies.
The site notes the blockchain can be “used as an alternative to current transaction switching and settlement models. In theory, it could also be used to lower the costs of providing these functions”.
This fits in with what Peric described as a need for a system that can is capable of supporting large amounts of small transactions, which are typically the norm for value amounts sent by people in developing nations.
“What we try to foster is national systems that are, essentially connecting providers together in an interoperable system that can reach out to the entire population and can serve huge amounts of small value transactions every day,” he continued. “That’s the primary goal we are trying to achieve.”
Bitcoin’s utility
Peric has said in the past that he is far more interested in bitcoin the technology versus its use as an alternative currency.
When asked in interview whether his view has evolved on this question, he cited the work of the Foundation in developing digital financial systems and looking for ways to utilize innovative technologies for doing so.
Citing feedback from individuals in some of the countries that Foundation works in, Peric says that bitcoin can’t quite meet the needs of those regional because people in those countries are accustomed to using local currency.
He explained:
“You receive your salary in your national currency so you can pay your schools, the bills for your house, in your national currency. So that’s what is most required at this moment, and that’s where bitcoin the currency cannot really help right now.”
However, he went on to clarify that bitcoin “can help in other contexts like international remittances, international money flows”.
Investing in the future
Peric has said that the key to jumpstarting financial inclusion isn’t simply a matter of throwing money at an idea or providing support for a particular project. Most important, he said, is fostering self-sustaining ideas that can continue to grow as support mechanisms subside.
“We can help bootstrap the system, to get it over, until the scale works, so that at the end of the day, the providers have a valuable and profitable business case to bring this forward and their systems become self-sustainable,” he said.
In conversation, Peric touched on the recent awarding of a $100,000 grant to Bitsoko, a Nairobi-based digital currency startup that focuses on payments and wallet provision, as part of the Foundation’s Grand Challenges Exploration (GCE) initiative.
Peric framed the grant as one component of the Foundation’s broader efforts to support innovation and entrepreneurship in developing companies, reiterating how the organization sees financial inclusion growing out of a diverse ecosystem of initiatives rather than one central effort or another.
This, he suggested, means providing grants to startups and initiatives that can contribute to that broader goal of bringing financial tools and services to developing communities.
“I don’t want to leave any stone unturned,” he said.
Kosta Peric is speaking at Consensus 2015 in New York. Join him at the Times Center on 10th September.