Going Global — Blockchain Paving the Next Step for the Alternative Finance Sector
Connecting global investors with unbanked SMEs in rising markets
According to a prominent ICO analyst, Ian Balina:
- 90% of the best performing ICOs had an MVP
- 63% had team members respected in their fields or had worked for respected companies
- 59% had advisors respected in their fields or had worked for respected companies
Shopping around for ICOs with the potential to moon, Ian Balina also says that the best have:
- Low to medium hard cap, ideally under 30 million USD
- Good token metrics
Post-ICO criteria for success, as per Satis Group LLC, the New York-based premier ICO advisory company, include:
- A launched ledger/product/platform — in beta, at minimum
- An official transparent project roadmap
- Contribution on Github code — in the last 3 months, at minimum
And my personal favourites:
- Do we really need blockchain for this?
- Or can we easily fix whatever problem the ICO is claiming to solve with already existing solutions?
Looking at this checklist, it’s evident that the majority of ICOs don’t have what it takes to deliver on their promises. But I’ve found a small project that has beaten the odds and checks positively on all of them.
This Lithuania based cryptocurrency project has developed a distributed business-to-business ecosystem to address a hot and lucrative issue: the enormous gap for credit experienced by small and medium enterprises (SMEs) around the world.
In fact, this World Bank subsidiary estimates that 60% of all micro-, small- and medium-sized enterprises in emerging markets lack access to credit. Yet they are one of the strongest drivers in economic development, innovation, employment and poverty reduction. SMEs are valuable in developed countries too, where they account for more than half of the GDP of their respective countries.
The number one issue limiting SMEs from taking off and innovating is inflexible financing or the lack of it.
If a marketplace able to provide global investors with trust and access to worldwide SMEs, ready to prove their creditworthiness existed, it would create a market worth an additional 2–5 trillion US dollars. Informal companies worldwide would add another 1 trillion on top of that.
Banks, the usual financiers, are risk averse and too inflexible and too standardised in loan procedures.
Due to their centralised business and organisational model, they are also slow, bureaucratic and out of touch with local needs. They’d rather go for large businesses able to generate them guaranteed returns.
Banks’ limited willingness to get to know smaller businesses has fueled a lucrative alternative financing market (AF). Local P2P lending, targeting consumers subjected to inflexible loan requirements, has proven a huge success and financing SMEs is on the rise. However..
Able creditors and willing borrowers are unevenly spread across the globe.
Most of the funding is in the developed world, while the majority of the 2–5 trillion credit gap exists in the rising markets.
To supply the demand, connecting the alternative financing globally is then the natural next step. But existing solutions do not present an easy way to overcome the industry’s uneven geographical spread, fragmented service infrastructure and, above all, lack of trust.
Other reasons include different national and regional regulations and lending cultures. Add to this that a service provider with a centralised setup attempting to overcome these obstacles would quite soon face the same service problems that make banks unable to cater to SMEs.
Debitum’s blockchain solution is able to bring forth the true potential of the budding alternative financing market by solving exactly the above issues.
Let’s have a look.
Harnessing the power of blockchain technology, Debitum is able to connect previously fragmented global actors through a decentralised B2B marketplace.
Debitum also bridges trust between international lenders and local borrowers through the security of blockchain technology.
And so, Debitum’s blockchain marketplace is able to effectively funnel credit to where credit is most needed. In other words, supply the demand.
Debitum offers a decentralised system that connects local businesses already in alternative financing.
These businesses are better acquainted with local regulations, procedures and lending cultures. And are able to therefore offer SMEs the personalised service needed to prove their creditworthiness and get a loan.
Through their decentralised network, Debitum would also speed up the process for application, risk assessment, insurance and debt collection. And reduce the costs associated with international credit loans.
To appeal to the widest segment of SMEs and local AF service providers, Debitum rightly chooses to function as a hybrid ecosystem (for now), taking into account where both the alternative financing and cryptocurrency markets are in their development.
I appreciate that Debitum’s team understand, are transparent and offer credible solutions to the issue of cryptocurrency adoption. I don’t think using only cryptocurrency and blockchain technology is feasible at this point in development. And if a project wants to see widespread adoption of their project carried out, it’s wise to compromise and be flexible .
A fully binding contractual legal framework also protects all players in the Debitum ecosystem, when they lend, borrow and collect.
You can read the full details on how they plan to execute their project in their Whitepaper.
Findings from a recent study by Satis Group claim, based on publicly available information and sources, that 80% of ICOs are scams.
In fact, too many ICOs don’t have what it takes to deliver on their promises today: they’re whitepaper ICOs that sell only ideas, have vague, uncommitted or incomplete teams, unclear road maps etc.
“I don’t invest in only ideas.”
Debitum is one of the 10% of unicorns Ian Balina speaks of that actually had an MVP, when they launched their ICO. Just 8 months after, they join the club of even fewer ICOs that actually deliver their product. Debitum Network is now Live — you can sign up here to see it in action.
Their Lithuania based team and advisors have the experience befitting their industry. Their Github is sound. Their roadmap is up on their website. And various demos and project updates are available on their official blog.
Debitum is a fitting example of a project that is able to justify using blockchain technology for their chosen industry.
Debitum does extremely well on my personal favourite questions too. I don’t think we can easily fix the problems alternative financing faces with current centralized solutions, like banks or trans-national credit companies.
I think a decentralized and hybrid blockchain solution, like Debitum’s - that connects, builds from and promotes the development of local alternative financing communities and infrastructure - is the way forward.
Overall, Debitum Network presents various service providers in the industry a massive opportunity to expand their business globally and reach markets hitherto untapped, due to a lack of international trust mechanisms and global market infrastructure.
Debitum has the technology to build a full end-to-end financing process and structure that can support the predicted exponential growth of the alternative financing market and bring it to the global arena.
So I recommend to check out Debitum Network, the first trust based decentralized ecosystem in SME lending.
Besides Hacker Noon I’m also on Quora / Steemit / Twitter / LinkedIn
This is not investment advice nor is it an official representation of the projects mentioned. It’s an opinion piece. So please consult official sources and contact the projects for fact verification.
Going Global — Blockchain Paving the Next Step for the Alternative Finance Sector was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.