The Impact of Technology on Poverty

In 2015, the United Nations passed a resolution titled Transforming our World: The 2030 Agenda for Sustainable Development. The act cites seventeen interlinked global goals designed to serve as a blueprint to achieve a more sustainable future by 2030.

This Agenda is a plan of action for people, the planet, and prosperity. It also seeks to strengthen universal peace and greater freedoms.

The UN's number one objective is the elimination of poverty. Today, billions of humans continue to live in poverty and are denied basic dignity. There are rising inequalities within and among countries and tremendous disparities in opportunity, wealth, and power.

The members of the United Nations aim to eradicate poverty in all its forms and dimensions, starting with extreme poverty, as the greatest global challenge and an indispensable requirement for all sustainable development efforts.

The following considerations focus on the impact of decentralized software solutions - popularized under the moniker blockchain- on the UN’s core objective of ending poverty in all forms everywhere.

Defining Poverty

The World Bank defines extreme poverty as persons living on less than US$1.90 a day. As of 2020, as much as 9.4% of the world’s population meets that criteria, according to the organization’s biennial Poverty and Shared Prosperity Report. This represents a regression to the poverty rate in 2017.

Additionally, 1.8 billion people are living in general poverty - defined as living on less than US$3.20 a day.

A quarter of the world's population live in poverty.

It should be noted that measures taken by government officials as a reaction to an assumed contagion threat of the COVID-19 virus are estimated to have pushed as many as 150 million people into extreme poverty in 2021 (more here).

Causes of Poverty

Research conducted by the International Food Study Institute examined the causes of poverty, through analysis of household data and review of empirical findings in 20 countries, identifying four leading indicators:

• the inability of poor households to secure property ownership
• limited and poor education, leading to fewer opportunities
• limited access to credit, creating more poverty via inherited poverty
• The systematic exclusion of ethnic minorities, ethnic castes, tribes, women, and people with disabilities from participating in fair economic enterprise and access to institutions and markets.

Property Ownership

Property ownership and secure property rights exceed the role as just economic assets, they provide a sense of identity, dignity, and belonging to people of very different economic means (more here).

Property rights create reliable ties between community members, creating a system of mutual recognition and responsibilities beyond local communities. For many poor individuals and the communities in which they live, the relationship with property is more than just an aggregate of occupied and used plots. It is an expression of a way of life and one that they must have the opportunity to improve through their efforts.

Land Registries

Land registries were historically created through paper records. These documents can be lost, destroyed, falsified, or otherwise manipulated. Most modern countries' governments have, therefore largely moved to digital land registration systems. However, if someone wants to sell an older property that hasn’t previously been registered, and the paper title deeds have been lost or destroyed, the process of registering the property to sell it can be very difficult. The latter is true for much of the world's population.

When an earthquake devastated large parts of Haiti in 2010, it left 1.5 million people homeless and destroyed 60 years’ worth of government archives, including land registrations. Since then, many Haitians have put great efforts and investment into rebuilding their towns and cities, but they remain without legal means of claiming the land as their own, given the government has no record of prior ownership.

A 2018 study into the state of land registration in Nigeria found that only 11% of real estate consultants said they always registered residential land purchases. The study also uncovered widespread corruption, along with an inefficient process for land registration evidenced by poor record-keeping, cumbersome processes, and lengthy delays.

These problems are not limited to the two examples but are indeed a common scenario around the world, causing financial hardship for families globally and more so in the developing world. Without an official, enforceable legal title to their property, citizens cannot resolve disputes over who can use which land for what – like who can farm where. They are also barred from borrowing against their existing assets to invest in their homes, businesses, or communities.

Peruvian economist and anti-poverty campaigner Hernando de Soto estimates that five billion people live without adequate records. He further suggests that the value of properties and the lost economic opportunities for owners of assets without formal documentation have been estimated at US$20 trillion worldwide.

Blockchain-based systems can address the fundamental shortcomings of paper or database-driven solutions to record ownership by creating a decentralized file system of immutable records. And, while the public at large has been led to believe that nonfungible tokens (NFTs) are synonymous with digital art, the paradigm has a much more important role in recording rights to real-world assets.

As such, blockchain-based land registries have begun to emerge in Bermuda, Brazil, Georgia, Ghana, Honduras, India, Russia, and Rwanda.

Financial Inclusion

In 1974, the Equal Credit Opportunity Act was passed in the United States, allowing women to open bank accounts and get credit cards without the permission of their husbands or male relatives.

Nevertheless, according to the Federal Reserve's Report on the Economic Well-Being of U.S. Households in 2020 - May 2021, five percent (5%) of the U.S. population remains unbanked. As shown in the graph below. The global picture of humans excluded from the legacy financial system is much worse.

The graphic above depicts the systemic exclusion of ethnic minorities, ethnic castes, tribes, women, and people with disabilities from participating in the legacy financial system.

And, while many countries have indicated via their central banks that new technologies may address the needs of the unbanked, it has become clear that ideas like CBDCs will indeed not address the reasons for which many - and likely most - citizens are currently excluded from financial systems (more here).

Cryptocurrencies, and - more broadly - censorship-resistant digital bearer instruments, and non-hosted (non-custodial) wallets already provide access to global financial services to an ever-growing number of citizens worldwide. Many of these individuals do not have the required government-issued credentials - an impediment that, according to a report by the World Bank, affects nearly one billion people globally.

As with voice-over-IP solutions, blockchain-based systems enable anybody to download client software (i.e., a digital wallet) for free and start using it without needing identification.

Note*: While some motivated individuals in government offices claim that cryptocurrencies pose a security risk and are increasingly used for illicit purposes, independent research has proven the opposite:  the criminal share of all cryptocurrency activity is 0.34% - well below that of traditional banking services.*

Sending money internationally

The gross domestic product (GDP) of countries worldwide depends on the inflow of foreign capital. However, certain regions are more reliant on remittances than others. According to World Bank data, 41% of all remittances sent in 2019 went to economies in the Asia Pacific.

Of these countries, Tonga is the most remittance-dependent. 39% of the country’s GDP in 2019 comprised remittances totaling $252 million. Other countries from the region in a similar situation to Tonga include Nepal, the Philippines, and Samoa.

As is common all over the world, citizens from these regions tend to move abroad to seek work in service-related jobs. Women often find employment in domestic and caregiving roles, and men usually earn money from seasonal agricultural work. The countries that migrant workers seek out most often are Australia, New Zealand, the United States of America, and Canada.

Another region that is heavily reliant on remittances is Central Asia. The World Bank stated that in 2019, Tajikistan and Kyrgyzstan were the fourth and fifth most remittance-dependent countries in the world, based on the percentage of GDP. The only countries ahead of them were Nepal, Haiti, and Tonga.

Central Asia is a region that contains, relatively speaking, very new countries. Tajikistan and Kyrgyzstan only became independent nations in 1991 due to the fall of the Soviet Union.

Tajikistan is the poorest of the Central Asian nations, predominantly due to its lack of arable land. It’s incredibly mountainous, with over 90% of its land considered upland. Both Tajikistan and Kyrgyzstan have struggled to forge strong economies because of conflict and poor governance. This means many workers head to Russia and send their money home.

According to a 2020 report by the World Bank, emigrants working abroad sent an estimated US$470 billion to their families in their home countries. This flow of capital is a significant factor in the financial well-being of families and societies in developing nations.

However, sending money through legacy financial service providers remains expensive. Using MoneyGram, for example, a migrant in the U.S. with US$50 to send to Ghana has to pay $10 in fees, meaning the recipient only receives $40.

In 2021, transaction costs and commission rates averaged 10.96 percent for remittances sent from banks and 6.36 percent for sending money through money transfer operators, more than double the SDG target of three percent.

Cryptocurrencies and non-custodial wallets can readily provide remittance services to anyone with a basic smartphone at costs far below SDG objectives.

We are currently involved in several humanitarian projects to design systems that can provide property rights, instant global settlement solutions, and secure digital credentials. Additionally, we are designing a donor system that provides complete real-time transparency into the use of any donation.

To learn more about these efforts, contact the author.