SAN FRANCISCO — On Wednesday, the government of Sierra Leone launched its new national digital identity platform.
The project the government is calling “Africa’s first blockchain and decentralized digital identity implementation,” is designed to provide its citizens with formal identity, control over their credit information, and access to digital financial services.
The platform runs on the Kiva Protocol, a digital identification system that uses blockchain, a distributed ledger technology, to address two major barriers to accessing financial services: a lack of formal identification and a lack of verifiable credit history.
Sierra Leone President Julius Maada Bio, who first announced this initiative at the United Nations General Assembly in September 2018, spoke at the launch event in Freetown, the capital of the West African nation.
“A verified identity makes everyone's life easier — the government, the citizens, the private sector, everyone. So it was easy to get everyone aligned about the goals and value of this initiative.”— David Sengeh, chief innovation officer for the Directorate of Science, Technology and Innovation in Sierra Leone
The National Civil Registration Commission developed the national digital identity platform with support from Kiva, a nonprofit organization based in San Francisco that allows people to lend money to low-income people around the world, as well as the United Nations Capital Development Fund and the United Nations Development Programme.
Kiva, which describes its work on Kiva Protocol as “building the credit bureau of the future,” wants this project to demonstrate how blockchain can bring robust credit reporting to the base of the economic pyramid. But as the organization builds on this blockchain effort and scales it from Sierra Leone to other countries, it will need to assess together with partners the best way to maximize the benefits and minimize the risks of the emerging technology to serve the unbanked, experts tell Devex.
Fixing the system
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Kiva has spent 13 years working in the unbanked world, and has deployed $1.3 billion through the Kiva.org marketplace. Matthew Davie, chief strategy officer at Kiva, joined the organization in 2018 with a focus on initiatives that would connect emerging technologies with vulnerable populations. Part of his mandate was to find ways that Kiva could not just continue to work around the system but rather build things to fix the system.
“The system right now is exclusive by design,” Davie said. “How and when it was built required copper wires and brick and mortar and that excluded a bunch of people from the system.”
He searched for technology enabled ways to change the existing infrastructure and create a system that would go from excluding people by design to serving people by design, he told Devex.
Kiva arrived at Hyperledger, open source blockchain technologies and related tools started by the Linux Foundation, for a couple of reasons. First, decentralization is the way of the future, particularly for vulnerable populations who are at risk from centralized sources of data, Davie said. Hyperledger would also allow Kiva to provide fast, secure, and free identity systems and credit reporting systems to the unbanked.
Beyond the considerations around technology, there was the question of where it made sense to launch. Davie noted three stakeholders that are key for any implementation: regulatory and government enablers, financial service providers, and end users. In Sierra Leone, the regulator was on board, and there were pre-existing efforts for identity registration and financial inclusion, as well as consumer protection and privacy principles in place.
Kiva also found an ally in David Sengeh, chief innovation officer for the Directorate of Science, Technology and Innovation in Sierra Leone.
“The president and the team get the need for this,” Sengeh told Devex via email. “Everyone who's ever engaged either in the formal sector or informal sector — that is all citizens — know the value of identification. So to be able to get a verified identity makes everyone's life easier — the government, the citizens, the private sector, everyone. So it was easy to get everyone aligned about the goals and value of this initiative.”
eKYC, or electronic Know Your Customer, a paperless process to identify the identity and determine the credit score of an individual, is just one way the country can leverage the national digital identity platform, Sengeh said. But while the possibilities are vast, so too are the risks. The government has worked with several agencies to ensure citizen data protection and the need for authentication by citizens when it comes to their biometric data, Sengeh explained.
Blockchain, beyond the hype
Before Kiva Protocol and the national digital identity platform, people in Sierra Leone who wanted to open a bank account might be asked to bring utility bills or information on their credit history, which they might not have.
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“Now, they can walk in and because the government has already done all this work around digital ID they can thumbprint in and use national ID card,” Davie said. “And through Kiva Protocol’s technology, we can enable in two seconds a KYC check to happen which would normally have taken two weeks.”
A credit check can happen in real time in a way that allows the consumer to be in control of what information is shared and allows the bank to get a complete and unaltered version of his or her credit history.
Rippleworks, a private foundation based in Redwood City, California, backed Kiva Protocol’s implementation in Sierra Leone with $5 million in funding.
“Kiva’s efforts to create a digital identity, gather and store an individual’s transactional information in a secure and tamper-proof environment, provide transparency to the stored information, and create a credit history are all the benefits of blockchain technology rolled into one solution that will dramatically increase access to capital at reduced costs that is an inspiring example of how blockchain can enable breakthroughs solutions for the underserved,” Doug Galen, cofounder and CEO of Rippleworks, told Devex via email.
Rippleworks led two research initiatives with the Stanford Graduate School of Business to better discern hype from reality among blockchain applications dedicated to social impact, he said.
Kiva Protocol was one of 193 blockchain initiatives included in a resulting report, “Blockchain for Social Impact: Moving Beyond the Hype.” It made the cut as one of just 20% of the initiatives identified as beyond the hype, with the potential to generate significant social impact that would not be possible without blockchain.
Kiva is not the only organization working to leverage blockchain technology for digital financial services. But what the organization does have going for it — as compared to others form the tech sector — is more experience in designing and carrying out social impact interventions, said Michael Cooper, a blockchain expert with knowledge in the use of distributed ledger technology for monitoring, evaluation, and learning.
Still, it is unclear how Kiva’s approach will be different than others as it scales Kiva Protocol from Sierra Leone to other countries where it sees an opportunity to leverage blockchain for the unbanked.
“There is a high level of uncertainty around different pieces of what Kiva is trying to do and what Kiva doesn’t have is a way to mitigate that uncertainty,” Cooper said.
For example, it is not clear that Kiva has the right feedback loops in place to help it decide what is and is not working, Cooper said. That is what leads to the failure of many early blockchain interventions, he noted. Kiva must also keep the risks of distributed ledger technology in mind, Cooper said.
A key question moving forward is whether Kiva will treat citizens of Sierra Leone as users or beneficiaries or a hybrid of both, and what assumptions the organization will make about their capacity to manage their own digital identity, he added.