Throughout the world, exclusion and access to banking is an issue that over two billion people face daily. Although there has been a series of efforts to bring financial services to the unbanked by financial institutions and other not for profit organizations, many are still suffering and have not received any aid.
The banking institutions that provide these services often are inaccessible or have done little to encourage the unbanked to embrace the banking system.
Those underbanked do not comprehend why they should join the banking system because savings and credit rates that they are offered are not competitive. Financial institutions such as banks offer such low interest on savings and charge high interest and collateral requirements on loans that most borrowers get turned away and begin to seek alternatives.
Microfinance banks, who are known to give loans without collateral often come up short as the lending services are provided to small businesses or individuals that have low-income and usually work within the gray economy. These have higher default rates and may lack the ability to repay the loans. Most loans given out to borrowers are not paid back due to the poor business and marketing skills.
Rather than partaking in traditional financial means, those underbanked in most developing countries participate in a system called reciprocal aid, where participants are both the shareholders and customers. These organizations put customers first, rather than shareholders in the traditional banking case. These reciprocal aid organizations are created based on an existing social tie a common background such as religion, ethnicity, or educational affiliation. The list goes on and on. These reciprocal aid organization or thrift collector agencies (as they are called in Africa) can also be known as rotating savings and credit associations (ROSCA) in the United States. However, there are some transparency issues with ROSCAs which are usually closed-off from the rest of the world and only exist in certain locations.
WeTrust is a collaborative platform powered by blockchain. It was created as an alternative to traditional financial and microfinance services which are not sustainable for the unbanked. WeTrust seeks to advance the reciprocal form of lending and insurance by leveraging the power of blockchain technology.
WeTrust wants to make to make ROSCAs more efficient and trustworthy through the launch of “WeTrust ROSCAs”, an autonomous, frictionless and decentralized application. The goal is also to amplify the benefits of reciprocal aid organizations namely: easy access to credit and fair savings and lending rates. On the other hand, we want to reduce the management costs and the security issues related with trusting a centralized authority. Furthermore, WeTrust makes ROSCAs globally accessible to anyone (as it is connected to the internet).
The WeTrust ROSCA Dapp is a credit and savings platform which allows users to lend and borrow from each other at self decisive interest rates with low friction. WeTrust is built to create a competitive alternative asset class for savers, promote group savings in a way to reach individual saving goal and create an inexpensive path for the two billion unbanked to obtain and track savings and credit.
The WeTrust application is designed to serve multiple audiences but specifically built for the unbanked or underbanked who need access to credit and other individuals who have access to financial institutions but want alternative solutions to savings and credit. Contrary to popular belief, the unbanked and underbanked population does not reside exclusively in developing countries, but also in developed ones, where banking retailers can be at times inaccessible
Rotating savings and credits associations (ROSCA), have been in existence for thousands of years, playing the role of financial institutions from the grassroots. Usually, they are a group of individuals who come together in agreement to meet for a defined period with the sole purpose of borrowing and lending together. This can be seen as a peer to peer form of banking and lending as they are normally built along geographical areas and clans, social networks and status or professional networks. ROSCA is present and thriving in developing countries of the world where the unbanked are located. Like most peer to peer systems, ROSCAs have worked well and continue to do in many countries.
WeTrust, which is a ROSCA on the blockchain network, is built to reduce the weaknesses of the traditional ROSCAs such as low liquidity, potential fraud from the organizer, accounting records and high fees. It is also set to automate what is proven to be an effective system for thousands of years.
The WeTrust ecosystem is comprised of three essential parties such as the sponsors, forepersons and referral partners. The application token known as Trust Coin is used to motivate the parties so as to foster growth and integrity on the system. Any member of the network can perform any of these three roles.
The WeTrust ROSCA application can be downloaded by users, who will then be prompted to create an account, the user is then given a unique deposit address. Periodic installment can be made directly into the platform and the group will be notified if a member misses payment. The participant will be able to view fund movements, bid information and audit funds in escrow.
Users will be able to deposit from their own wallet to the unique address during each round and receive payment to the address of their choice. The token to use is determined by the foreperson and WeTrust will provide recommendation on where and how users can get the token of choice.
With the presence of ROSCAs on the blockchain, the unbanked can be certain that they can assess credit and achieve their saving and investment goals with ease and speed, being connected to a peer-to-peer network of users that are trying to do the same and can share information and advices, making WeTrust a truly community-driven project.