What Makes Bitcoin a Great Tool for Financial Inclusion?

Published in

The LocalBitcoins blog

6 min readNov 12, 2021

From a Western perspective, it’s easy to dismiss the very real need for a global financial network. This is pure ignorance. From a global perspective, it’s clear that such a network serves a real purpose. For example, a recent study revealed that over 60% of the population in Morocco, Vietnam, Egypt, Philippines, and Mexico remain unbanked.

According to the World Bank, there were 1.7 billion unbanked adults in 2017. According to a Global Finance comparison: “In the Middle East and Africa 50% of the population is financially excluded, with South and Central America nearing 38%, Eastern Europe at 33% and Asia Pacific at 24%”. Bitcoin can help bring financial services to these people, and there’s a huge untapped potential in onboarding these people into the new digital money standard. Access to financial services, in turn, enables inclusion and equality.

Gender Inequality and Legal Hurdles

It’s also important to point out that women are overrepresented among the unbanked since they make up 56 percent, or 980 million, of the total 1.7 billion. Financial exclusion is not only a problem that concerns the developing countries since 30% of adults in the U.S. don’t own a traditional bank account.

These numbers are even higher among minorities since, for example, only 51% of Black women in the U.S. own a traditional bank account. Thus, it’s clear that this is also a socioeconomic and demographic question, and one way to increase social inclusion and equality.

Comparing these numbers to the 5.26 billion unique mobile phone users in the world, and a swiftly increasing percentage of >45% of adults who own a smartphone, even in emerging countries, it’s clear that there is an enormous potential in increasing financial inclusion with easy-access solutions and mobile phone apps that provide financial services built on the Bitcoin network.

Innovators such as Jack Dorsey and Jack Mallers are at the forefront of this development, bringing services such as Cash App and Strike to all demographic groups in the U.S. and other countries. Unfortunately, many countries limit the availability of such applications.

It is a sad truth that those in power rarely give up their powers voluntarily, and in many of the developing countries, using Bitcoin still requires unnecessarily complicated technical knowledge and equipment. One of the trailblazers in bringing financial services to emerging markets is LocalBitcoins. One of their biggest markets is Nigeria, where inflation is projected to reach 16% in 2021, so it’s clear that Nigerians benefit from bitcoin. Argentina is another major country with a large LocalBitcoins customer base that suffered from a staggering inflation percentage of 42% in 2020.

51% of Argentinians remain unbanked, but 76% of the population are active social media users, so solutions such as implementing Bitcoin and Lightning Network wallets into Twitter might function as a work-around solution for financial inclusion. Most likely such solutions would already be implemented if it wasn’t for legal hurdles that are artificial ways to hinder technological advancement, which would benefit those in dire straits the most.

Saving is a Financial Privilege

Of course, it is a privilege to afford to hold savings in any country, let alone in emerging economies. The most common reason for not having a bank account, mentioned by 70% of respondents, in a survey by Sepa Cyber Technologies, was simply the lack of money. This implies that most of the respondents live paycheck to paycheck and struggle to hold any savings. For them, financial inclusion and saving must happen through other means. Such means might include services that provide bitcoin cashback on purchases or platforms that provide compensation for small tasks in bitcoin.

Hopefully the future will also increasingly acknowledge that users own their data, and through the saturation of the social media market, services that exploit user data and deliver advertisements to users will be forced to compete for users’ attention, for example by paying users through bitcoin micropayments.

Sixteen percent of the aforementioned respondents also mentioned that “the lack of trust and protection of their private data” was a reason not to own a bank account. In this regard, Bitcoin companies have a lot of work to do to win the trust of the people. After centuries of corruption and exploitation, they have all the reason to be dubious since the digital asset market, too, is awash with charlatans.

Don’t Trust the “Get-Rich-Quick” Schemes

How do you save any money if you can barely afford bare necessities? That seems to be the most common problem preventing low-income individuals from starting their Bitcoin saving journey. If you only have $10 to save, or invest, it’s only logical to fall for the endless get-rich-quick hype troubling the digital asset industry. Yet, if it sounds too good to be true, it most likely is.

The myriad of crypto services that mercilessly exploit the contemporary popular hype coins in their marketing are doing a huge disservice to the more honest services. Rags to riches stories and huge gains increase the appeal of such tokens, but it’s important to remember that for every winner, there are dozens of losers. Only a very small percentage of people are in the inner circle that knows the right time to invest in a said asset, or gets lucky with their timing, and most likely you won’t be among the lucky few.

Trust the “Increase-Your-Wealth-Slowly” Scheme

Bitcoin has been defined as winning the lottery, slowly but surely. This might sound boring, but so does working paycheck to paycheck for the rest of your life. For the last ten years, Bitcoin’s average yearly return has been 230%. In plain English, if you store $100 in Bitcoin, you should be looking at $230 next year. Note that this is based on historical data and doesn’t guarantee such future performance. Bitcoin isn’t a get-rich-quick scheme and requires hard work, dedication, and a long-time perspective.

If your timing is off, you might buy at a relatively high price and suffer temporary losses. Bitcoin has witnessed two years where the annual return was -58% in 2014 and -73% in 2018. However, if you set aside $10 a month in bitcoin for two years, and you commit to holding it through thick and thin for at least four years, based on historical data, there’s zero chance that your investment remains unprofitable.

A long-term savings plan is crucial, and the hardest part about Bitcoin is sticking to your investment plan since as greedy beings, most people are only interested in the profits.

Bitcoin Restores the Power of Money

Bitcoin isn’t only about huge profits, however. It’s a great tool to increase consumer awareness since no bitcoin owner will exchange their superior money for inferior products. It restores the power that money once had and brings that power to the people. Its deflationary nature, juxtaposed with the inflationary nature of other currencies drains value from big corporations, and forces them to return to a healthier market based on the functional, not the perceived, value of products. After all, a $1,000 plastic bag is still just a plastic bag.

Bitcoin is the best way for any individual to help the progress of financial inclusion and a direct way to increase equality. This happens through education and by creating easy platforms to onboard new users to the network. If your country is lagging behind and still lacks any modern finance applications, there are other means to acquire Bitcoin. LocalBitcoins offers a simple and safe way to buy even small amounts of bitcoin.