One of the most significant understandings that one acquires from working in financial inclusion for any length of time is that philanthropy doesn’t scale. In the long term, eradicating poverty will always come down to a single common denominator: enabling a pathway for people in the poorest parts of the world to become successful in their commercial endeavours. Any number of ideas have been put forward about how to enable that kind of success; research and experimentation have identified a few approaches that seem to work well – such as better education, improved infrastructure, or easier access to commercial credit – as well as many approaches that don’t seem to help at all.
But despite wave after wave of innovation, one of the most basic and fundamental barriers to commercial success for individuals and small companies remains in place, even in mature economies: it is difficult, complex, and in many cases simply not possible for small businesses to market their goods and services outside their own countries. Due to their economies of scale, larger enterprises are often able to invest in overcoming these obstacles, but small businesses and individuals don’t have access to the same level of resources.
The announcement of Libra by Facebook last year sparked considerable excitement in the financial inclusion community that Libra – or a similar global derivative currency like it – might actually provide a solution to this most intransigent of barriers to development and growth. Interest in Libra has since waned, largely due to some serious and well-founded doubts about whether Facebook would be a reliable custodian of the unprecedented quality and depth of data that would be accessible to someone who operated a global digital currency like Libra. But the fundamental idea remains sound, and no less exciting.
In the second half of last year my firm, Finserv Experts, was commissioned by a public sector client to help understand the impact of Libra better. In addition to the more typical literature review and quantitative analysis, we also endeavoured to tell the story of Libra’s potential in a more human story and put forward a narrative of what access to a global market of buyers might mean to a woman whose employment was weaving blankets in Bangladesh. Cursory online inquiry revealed that the average earnings for someone making hand-woven blankets in Bangladesh was in the neighbourhood of USD $52 per month. Meanwhile, the average of the first twelve listings when doing a search on Etsy for woven blankets came to USD $69. In other words, if a weaver in Bangladesh were able to list and accept payment for her blankets to the rest of the world, she could double her earnings by selling only one blanket each month.
According to the World Bank, the number of people living in extreme poverty around the world fell over 70% between the advent of the internet and 2016. Allowing individuals and small business access to world markets could drive a similar level of change, not only in developing economies but for small enterprises in mature economies as well. The world may or may not be ready for a truly global basket-based currency like Libra, but central banks around the world are beginning to digitize their existing currencies, including the country with the single largest market of potential customers, China, via their recently announced DCEP initiative. And China has made it manifestly clear that one of the goals of DCEP is to make it accessible to companies operating outside China.
Because of this overwhelming potential to stimulate the commercial success of individuals and small businesses around the world by granting them access to the world’s largest market of buyers, Finserv Experts has elected to begin investing in the capability to help small businesses enable themselves to operate, access, and sell via DCEP. The world’s largest enterprises will manage to connect to DCEP themselves or engage some of the world’s large systems integrators to accomplish it. But smaller companies will need help doing this, and our aim is that Finserv Experts will be there to help them get it done.
To help the technical and finance community in the UK better understand what DCEP is and the impact it is going to have on the global financial community, Finserv Experts held a session on DCEP in London on the evening of 18 February. This session was delivered by Kefirah Kang, our China-based delivery leader, and by Ewan Puckle Hobbs, our Singapore-based enterprise business architect. The evening was hosted by Erica Stanford as part of the excellent London Crypto Curry series and was attended by senior businesspeople and thought leaders from the UK and abroad.