70% of small and medium enterprises all over the world lack access to credit, and it is an opportunity gap of US $ 2 trillion. Lithuania-based Debitum Network will solve this with the help of blockchain technology.
If you have traveled to a few different countries, with eyes wide open, and ventured into interior regions or even suburban areas of the big cities, you have already seen this. On the other hand, if you have read economic history of several countries, you know it. Yes, I am talking about the impact small and medium businesses have on the economy and society of a country. They don't get the press that a Google or an Apple gets. However, it is now proven beyond doubt that due to their very dynamics, big businesses have limitations on how fast they can grow, and how many jobs they can generate. On the other hand, small and medium enterprises allow common people to look beyond job and earn their own livelihood, while also generating employment locally. It's now a proven fact that the countries offering favorable environment for small and medium businesses to operate tide over the inevitable economic downturns easier than the countries that don't offer such environment. Given this backdrop, you will be appalled to know that according to World Bank, an estimated 70% of small and medium enterprises all over the world lack access to credit. The unrealized lending opportunity amounts to a staggering US $ 2 trillion! But then, if you run a small business, then you probably don't need the World Bank report, because you know it from your experiences, i.e loan applications for even modest amounts declined by the bank, having to borrow money from other lenders at exorbitant interest rates, etc. You were faced with 2 choices only: either borrow at exorbitant rate of interest after long struggle to expand your business, or remain small!
Banks and large financial institutions need to assure themselves that the money they lend will yield appropriate return. They have multiple mechanisms for this, for e.g. risk assurance prior to lending, debt collection and selling one's investment into secondary market post lending, etc. With big businesses, banks can execute these processes relatively easily. The situation is quite different for small businesses operating from far corners of the globe, banks typically find it very hard to execute the above mentioned mechanisms. This is why the current banking system favors big businesses when it comes to lending. On the other hand, there may be local smaller financial institutions, willing to lend small amount of money, which is what the small businesses really need, to expand their business. However, the small businesses are simply unaware of such local credit opportunities. In some instances, national governments have intervened, to help small and medium businesses get credit. In India, the Government of India (GoI) has established the Micro Units Development and Refinance Agency (MUDRA), which is a bank, in 2015, to facilitate credit to small businesses.
If a global platform can be developed where small lenders, small businesses, risk assessors, document validators and insurers can be brought together, to interact in a decentralized and secured manner, then small businesses can leverage lending opportunities that they weren't aware of earlier.
Vilnius, Lithuania-based Debitum Network is bringing the required parties mentioned above together, to facilitate credit for small businesses. Their solution is based on blockchain, which is decentralized by design, and is secured. Blockchain is a distributed database where computers in the network maintain a shared version of truth that is immutable, and mathematically verified. Every computer on the network, also called 'node', has the same and latest information present on the blockchain, and this is why it is also called 'Distributed Ledger Technology' (DLT). Every node has equal authority, i.e. updates to blockchain need not be routed through any central server or centralized point of authority. The decentralized design makes it imperative to maintain correct order of transactions, without which data integrity in blockchain can't be maintained, and this is where the superior security of blockchain is implemented. Updating a blockchain essentially means creating a new block record, also called 'block', for, no existing record can be deleted or updated. Adding a new record requires a very involved process called 'mining', which is executed by a combination of specially designed hardware, special-purpose software and their user, the combination being known as the 'miner'. Adding a new block brings reward to the miners, in the form of a fraction of the cryptocurrency token they create via this mining process, and hence mining is intensely competitive. To add a new block, a miner not only has to provide the details of the transactions concerning the new block, but also a reference to the last recorded block in the blockchain. Giving the reference of the last recorded block is called proof of work (POW), and it is essentially trying one number after another, at remarkable speed, because in this competitive environment every other miner is also trying to do the same. It's a massive number-crunching operation requiring very significant computing resources, and only when a miner produces POW, the consensus mechanism of blockchain approves addition of the new block. Such as complex process including consensus algorithm, involving massive computing power, makes hacking blockchain economically non-viable, and hence blockchain is very secure.
Debitum Network's platform will work as following:
Debitum Network is backed by Debifo, which is a leading alternative financing platform serving small and medium enterprises. A reputed and innovative Lithuania-based IT company Inntec is also part of this partnership. Debitum Network has a 'Minimum Viable Product' (MVP) already with them, and their plans are following:
Q1-Q3 of 2018: Build Debitum Network 1.0, crowdsale of their token DEB, product development, establish team in preparation for global expansion, establish their platform in the 1st target country, testing the platform and auditing it;
Q4 of 2018: Build Debitum Network ecosystem version 1.0, onboard small business owners, lenders, risk assurance experts, document validators and other related service providers.