In many developing countries, people lack access to financial instruments such as mobile banking. These services often require smartphones and the internet, creating a major barrier for low-income communities and limiting participation in the global economy. As a result, cash is often the only option, leaving individuals without secure ways to save or transfer money. According to the World Bank, 51% of adults in sub-Saharan Africa are without a bank account.

Financial inclusion is crucial for poverty alleviation. Services such as blockchain can expand access to financial systems, reduce transaction costs, and provide security and transparency. Innovative platforms such as Kotani Pay, a blockchain-based system that does not require the internet, are bridging the gaps in Africa.

What is Blockchain?

Blockchain is a decentralized and tamper-proof digital ledger recording transactions across a distributed network. It is a technology which provides security and transparency without the need of traditional intermediaries such as banks. This allows faster, cheaper and more efficient transactions without people needing a traditional bank account.

Key benefits of blockchain include:

• Security and transparency: Transactions are recorded immutably and can be verified without a central authority
• Lower costs: Reduces fees compared to traditional banking or remittance services
• Global access: Enables cross-border payments and international trade even for underserved populations

By reducing these barriers, blockchain can reduce poverty by giving individuals a tool to save, invest, and receive financial support.

Blockchain and Financial Inclusion

Many financial systems are designed assuming users have smartphones, internet access, and identification documents. Throughout Africa, however, millions of people lack these resources, especially in rural areas. Blockchain platforms that adapt to local realities, such as supporting Unstructured Supplementary Service Data (USSD) transactions or mobile-money-compatible wallets, can extend financial services to previously excluded populations.

Stablecoins, digital currencies pegged to traditional assets like the U.S. dollar, also reduce the risk of currency fluctuations for low-income individuals, making savings and transfers more predictable. By providing low-cost, accessible financial services, blockchain directly contributes to poverty reduction.

What is Kotani Pay?

Kotani Pay is a Kenyan startup which brings financial services to those without internet or traditional bank accounts. Kotani Pay is a service that lets users access blockchain and cryptocurrencies via USSD. Using USSD codes, Kotani Pay enables users to:

• Send and receive money securely
• Convert digital assets into local currency
• Participate in programs such as Universal Basic Income (UBI)

“We built Kotani Pay to bring financial instruments and services to those who do not have access to the Internet or have the capital and credit standing to open a bank account, thus increasing financial freedom.”

How It Works

Users can dial a short code on their phone to access a menu where they can convert crypto to fiat, and vice versa. This simplified process enables users to transfer funds between their blockchain and wallet. Kotani Pay uses a stablecoin, Celo Dollars (cUSD), which is pegged to the U.S. dollar, protecting users from the otherwise common volatility of cryptocurrencies.

Because Kotani Pay focuses on helping underserved communities, they correct the typically high fees for cross-border transactions, increasing financial stability for those sending money abroad to their family, or those crossing borders fleeing for safety.

Since its launch, Kotani Pay has reached more than 15,000 beneficiaries, including refugees, gig workers, and rural farmers, UNICEF reports. By providing predictable financial support and easy access to transactions, Kotani Pay helps people start small businesses, save safely, and engage with the economy.

The Future

In the fight for financial inclusion, blockchain could reduce poverty more effectively than conventional banking reforms. Blockchain is not the only and sole solution, but it can play a key role in reducing financial exclusion. If Kotani Pay proves successful, the opportunity for scalability is huge. And with that, reduce global poverty. Its main challenge however, is regulation and legislation. With a mission of serving the entire continent, meeting each countries’ regulatory requirements has slowed its growth. But it has not halted its mission.

Whether blockchain reduces poverty is down to how effectively governments, innovators, and communities can implement inclusive and affordable solutions. By providing secure, low-cost, and accessible financial tools, blockchain platforms like Kotani Pay are helping African communities participate in the global economy.

– Ashley Pfeifer

Ashley is based in London, UK and focuses on Business and NGood News for The Borgen Project.

Photo: Flickr