Crypto-Based Microfinance Opens Possibilities for Small Businesses
Once upon a time, the brave men and women with a business idea could stroll down to their bank, whip out a business plan and shake hands on a sum to fund their venture. This ideal scenario is fading away into a distant memory with fewer financial institutions ready to back businesses in an unstable economy.
For entrepreneurs trying to get their business off the ground in developing nations, this dream has never really been a possibility. In fact, these business minds often don’t even have access to bank accounts to start their business. So, could crypto and owning a Luno Bitcoin Wallet be the solution for small businesses here – and in more economically developed locations? It might just be.
Unbanked Businesses: A Global Issue
Unbanked populations are usually associated with certain regions of Africa, but this is not the entire story. It is reported that 25% of US households do not have access to a bank account or are underbanked, proving the problem is much wider than Sub-Saharan Africa. Issues with too few people having access to financial services are extensively documented, but the problems this has on small businesses have not received the same level of attention.
Yet, not having access to bank accounts can destroy small businesses before they even get started. They need bank accounts for administrative purposes, to try and secure bank loans, for tax reasons and the list goes on. Ultimately, business growth is simply not a possibility without banking services – and this is where crypto enters the frame.
The Alternative Solutions for Unbanked Businesses
In this position, entrepreneurs have turned to the people to back their idea and their startup through microfinance. This means multiple investors will back an entrepreneur and their idea that do not have traditional banking means. The problems with microfinancing to underdeveloped areas is that there is not always a strong basis of trust which results in bloated fees and higher interest rates than they would have received by using a bank (if they can).
Using cryptocurrency to fund these businesses can become a worthy solution. Crypto is beneficial because it is completely secure, transparent – and does not require the business to own a bank account. As long as the business has a crypto wallet where they can receive the funds to get their idea off the ground, they are, well shall we say, in business. The benefits of crypto as a way to help unbanked populations have been exhausted but using it to specifically help unbanked businesses is an innovative and fresh idea.
Crypto Ruffling More Feathers
When using crypto as a form of microfinance, businesses are avoiding speaking with reluctant banks and removing the power from them. No longer are banks the judges of which businesses shall thrive and which will suffer a premature death.
In this light, crypto again removes powers from a central authority.