By Tuhu Nugraha and Temmy Debora*

In the midst of the rapid digital era, blockchain technology emerges as an innovation with the potential to revolutionize the global financial industry. In Indonesia, SMEs managed by women stand as one of the sectors that can reap significant benefits from this technology. SMEs play a crucial role in the national economy, with over 64.2 million business units contributing 61.9% to the GDP and employing up to 97% of the workforce.

However, many SMEs face challenges, ranging from access to financing to marketing issues and productivity. With the government’s financial inclusion target set at 90% for 2024, the role of SMEs, especially those managed by women (which account for 64.5% of all SMEs), becomes pivotal. Therefore, promoting financial inclusion for female entrepreneurs has a strategic impact in achieving this target.

Here’s how blockchain can be a solution to enhance financial inclusion for female SME entrepreneurs in Indonesia:

Access to Financing

Based on data from the Ministry of Communication and Information, only 20 million out of 64 million SMEs have accessed formal financial institutions. One of the main reasons many SMEs, especially those managed by women, struggle to access formal financial institutions is due to stringent requirements. Many SMEs lack formal documents like audited financial statements, physical collateral, or a good credit history. Moreover, the lengthy and bureaucratic loan application process often becomes a barrier for SMEs to obtain working capital.

Blockchain technology offers a financial inclusion solution for female-managed SMEs in Indonesia, often hindered by strict requirements and lengthy processes in formal financial institutions. With a blockchain-based lending platform, female-managed SMEs can access financing with a simpler, transparent, and efficient process. Direct interaction between lenders and borrowers reduces transaction costs, while blockchain transparency enhances trust. Additionally, an alternative credit assessment model based on SME transaction data allows those without a formal credit history to still obtain financing.

Low Transaction Costs

Transaction costs play a significant role in SME operations. For many SMEs, especially those transacting in small amounts, high transaction costs can significantly erode profit margins. This becomes even more critical for female-managed SMEs who might have limited initial capital and smaller operations compared to other SMEs.

Blockchain technology offers a solution to reduce these transaction costs. With its decentralized nature, blockchain eliminates the need for intermediaries like banks or other financial institutions. This means that fees typically charged by intermediaries – such as administrative fees, transfer fees, or other charges – can be eliminated or drastically reduced.

When compared to the interest rates currently borne by SMEs from loan sharks, the difference becomes stark. Loan sharks typically offer loans with very high-interest rates, sometimes reaching 20% to 40% per month. This is much higher compared to interest rates from formal financial institutions. With blockchain, female-managed SMEs can not only reduce transaction costs but also potentially access financing at lower interest rates through blockchain-based peer-to-peer lending platforms.

Thus, adopting blockchain technology can provide dual benefits for female-managed SMEs: reducing transaction costs and providing access to cheaper financing, thereby enhancing their profit margins and competitiveness in the market.

Global Payments

In the midst of globalization, female-managed SMEs in Indonesia find opportunities to penetrate international markets. However, a disparity is evident: although SME exporters account for 77.28% or about 13,775 exporters, their contribution is only 4.09% or 6.331 million USD of total exports. In contrast, large-scale exporters, which only account for 22.72% or 4,044 exporters, dominate with a contribution of 95.9% or 148.609.7 million USD, as stated by the Director of Export Market Development of the Ministry of Trade in 2023. One of the main challenges faced by female-managed SMEs is cross-border transactions. Many of them find it difficult to access international payment platforms, such as PayPal, due to language barriers and complex administrative requirements. High transaction fees and long settlement times through conventional banks add to their burden. As a solution, blockchain technology and cryptocurrencies emerge, offering simpler transactions, lower fees, and higher security. With an interface that supports the Indonesian language and without the need for a conventional bank account, female-managed SMEs now have a greater opportunity to compete more effectively on the international stage.

Digital Identity

Female-managed SMEs, especially in remote areas, often face challenges in accessing financial services such as loans or insurance. One of their main obstacles is the lack of formal identity documents, such as national ID cards, family cards, or proof of land ownership, typically required by banks or other financial institutions. Without these documents, they are often marginalized from the formal financial system. However, blockchain technology offers an innovative solution to this problem. Imagine blockchain as a secure digital ledger, where every piece of information entered cannot be altered or deleted. With this technology, female-managed SMEs can have a “digital identity” registered on the blockchain. This identity can contain basic information such as name, address, business transaction history, and more. Most importantly, this identity is secure and verified. By having a blockchain-based digital identity, female-managed SMEs in remote areas can demonstrate to financial institutions that they are legitimate and trustworthy business entities. This makes it easier for them to apply for loans, open bank accounts, or access other financial services that were previously hard to reach. In other words, blockchain provides an opportunity for female-managed SMEs to integrate into the formal economy, enhancing their business growth potential.

Blockchain provides innovative solutions for female-managed SMEs in Indonesia, especially in remote areas. There, they often face various challenges, from inadequate education, limited capital, to a lack of supporting infrastructure. But why focus on female-managed SMEs? Because in many cases, these women are the main pillars of the family. They play a crucial role in efforts to break the chain of poverty, hoping to provide better education for future generations. With the help of blockchain technology, financial inclusion can be expanded, social disparities can be reduced, and opportunities for female-managed SMEs to improve their families’ quality of life become even greater.

Tuhu NugrahaTuhu Nugraha is a Digital Business & Metaverse Expert Principal of Indonesia Applied Economy & Regulatory Network (IADERN)

Temmy Debora, is the CEO and Founder Nakama.id, & Web3 Trailblazer Indonesia

Courtesy: Modern Diplomacy

Strategically nestled between Dubai and London, Istanbul is emerging as Turkey’s financial nerve center, pulling global events and organizations into its vibrant orbit. Its unique geographic position offers event planners a canvas to meld Eastern and Western cultural nuances seamlessly, a feature that was palpably felt at Istanbul Blockchain Week 2023.

Spanning two eventful days in August at the Hilton Istanbul Bomonti, IBW 2023 buzzed with a confluence of blockchain enthusiasts, both local and global. The itinerary was chiseled to encapsulate the multifaceted Web3 landscape, spotlighting topics ranging from the interfaces between artificial intelligence (AI) and blockchain to real-world applications of this groundbreaking technology.

Notably, IBW 2023 mirrored the broader narrative of the crypto ecosystem in the Middle East, particularly the burgeoning Web3 and crypto sector in the UAE. Region-centric discussions, such as Islamic finance’s synergy with a Shariah-compliant Web3 milieu, underlined the event’s relevance. The rapid proliferation of these sectors in places like Dubai and the UAE’s burgeoning interest in the Turkish market set the stage for EAK Digital’s timely decision to host the event, especially with the summer heat making Dubai a less appealing venue. Erhan Korhaliller, the visionary behind EAK Digital, elucidated this strategic move, emphasizing Istanbul’s appeal as an international fulcrum for the UAE’s major stakeholders.

One cannot overlook the sheer scale and diversity of the gathering. From government officials to influential financial institutions, the convergence was impressive. The venue teemed with blockchain aficionados, workshops, roundtable dialogues, and even a futuristic touch with participants getting scanned for metaverse entry. Not to mention the engaging interactions with Desi, the AI conversationalist developed by SingularityNET and Yaya Labs.

Yet, in a marked departure from the previous year, nonfungible tokens (NFTs) found limited representation. With a notable downtrend in NFT trading, organizers leaned into market feedback. Korhaliller noted the adaptability required, stating the clear lack of interest in NFTs this year.

Parallelly, the event witnessed spirited engagements around Islamic finance. As industry experts unraveled the intricacies of this ancient financial system, a cohort of budding developers was engrossed in the IstanHack hackathon, crafting innovative solutions that harmonized with the event’s overarching theme of ethical finance.

AI dominated many conversations, both within and outside the main hall. Loic Claveau of SingularityNET weighed in on the democratization of data, stressing the profound potential of decentralized AI on the blockchain. He painted a vivid picture of AI’s voracious appetite for data and the monopoly of tech giants in the field.

Istanbul’s growing role in the crypto sphere also saw reflections in the words of Eray Dengiz, CEO of Cointelegraph Turkey. With prominent Turkish banks actively participating and discussions centering on the future of finance, the city’s positioning as a financial hub was evident. Addy Crezee, the founder of NFT ticketing platform Ozaru, encapsulated the phenomenal growth of the crypto world, recalling the modest gatherings of yesteryears and contrasting them with today’s expansive events.

In conclusion, Istanbul’s Blockchain Week 2023 wasn’t merely an event—it was a testament to the city’s burgeoning role in shaping the future of finance and technology.

By  Tuhu Nugraha

Could the financial evolution of the powerhouse BRICS nations signal a new era in global economics? As these nations stand at a crossroads, the answer might lie in blockchain. Before diving into the transformative potential of blockchain for BRICS, it’s essential to understand the group’s historical foundation. Originating from the acronym coined by Goldman Sachs in 2001, BRICS signifies the emerging economies poised to rival the G7 nations. Over the years, these countries have evolved from mere market predictions to a cohesive group, showcasing combined economic prowess and geopolitical influence. Knowing their storied past will provide a clearer perspective on why their future steps, particularly in the realm of blockchain and financial technology, could be so impactful globally.

The BRICS consortium, comprising Brazil, Russia, India, China, and South Africa, signifies a potent economic force on the global stage. They contribute immensely to global economic growth, boasting significant foreign reserves. Blessed with abundant natural resources, combined populations that sum up to over 40% of the global populace, and a shared vision for multilateral cooperation, BRICS plays a pivotal role in international geopolitical and economic dynamics. Their presence not only signifies a shift in economic power but also epitomizes how cultural and historical diversities can converge for a shared global goal.

Through BRICS, member nations have augmented cooperation across various domains, including finance, trade, and development. A testament to this cooperation is the establishment of the New Development Bank (NDB) aimed at financing infrastructure projects in developing countries. Recent reports indicate that 44 nations have expressed interest in joining BRICS, especially with the upcoming summit in Johannesburg, South Africa, from August 22-24, 2023. The meeting’s focal agenda is the potential expansion of the bloc to counterbalance Western hegemony led by the United States. According to Goldman Sachs, by 2050, the combined economy of BRICS nations will emerge as a new global power.

Amid the rapid global financial evolution, BRICS nations find themselves at a strategic crossroads: Should they introduce a joint digital currency or devise a cross-national payment system harnessing blockchain and crypto technology? While both options seem promising, the scales tilt in favor of a blockchain-based payment system, and here’s why:

Economic & Policy Uniformity: A unified digital currency demands cohesive economic and monetary policies amongst BRICS nations. Given the considerable disparities in their economies and monetary policies, reaching a consensus will be challenging.

Technological Infrastructure: Deploying blockchain and crypto proves more straightforward than introducing a new digital currency. BRICS nations, having delved into this tech, can leverage it to craft a more efficient payment framework.

Adoption & Integration: Blockchain-based payment systems can seamlessly integrate with existing financial infrastructures, ensuring smoother and quicker market acceptance. As a potential alternative to the global SWIFT standard, blockchain offers benefits like speed, transparency, lower costs, and enhanced security through encryption and decentralization.

Autonomy & Independence: By adopting a blockchain-based system, BRICS nations can maintain monetary policy autonomy while benefiting from shared technology prowess.

Security & Transparency: Blockchain’s hallmark is its transparency and security. A blockchain-based cross-border payment system ensures verifiable transactions, amplifying trust and minimizing fraud risks.

External Pressure Resilience: With a blockchain payment system, BRICS nations can lessen their reliance on global currencies like the US Dollar, fortifying their economic resilience against external pressures.

Smoother Transition: Launching a new currency potentially opens a conflict with the Western-dominated global order. Given the simmering tensions due to China’s rise, post-Covid-19 economic recovery, and the Russia-Ukraine conflict, a blockchain-based alternative payment system offers a middle ground that doesn’t directly challenge the West. It’s seen more as economic pragmatism, likely garnering support from neutral nations.

In conclusion, the allure of a unified BRICS digital currency cannot be denied, but the intricate economic and political landscapes of its member countries point towards a blockchain and crypto-based international payment system as a more pragmatic choice. This innovation would not only bolster BRICS’s position on the global stage but also offer them greater autonomy over their financial destiny. Given the significant geopolitical shifts such decisions could precipitate, a deeper exploration into the global power dynamics and diplomatic consequences is imperative. This insight will provide a clearer perspective on the broader ramifications BRICS’s actions might have, especially when contending with well-established Western financial frameworks.

Tuhu Nugraha is a Digital Business & Metaverse Expert Principal of Indonesia Applied Economy & Regulatory Network (IADERN)

Courtesy: Modern Diplomacy