One of the biggest causes of poverty is the lack of access to credit and escrow. Much of the world’s population has no means of borrowing or lending money.
With no means of borrowing money, people cannot buy real estate, start or run a business, or cover emergency expenses. The only money most poor people can access is the cash in their pocket.
The situation is far worse in developing nations where most of the world’s “unbanked” people live. The unbanked are the 1.7 billion persons the World Bank estimates have no bank account.
Lack of access to a brick-and-mortar bank is the most common reason for being unbanked. Religion plays a role too; 86% of adults in the Middle East are unbanked.
Banks refuse to operate in that region because Islamic Sharia law teaches that charging interest is a sin. Most modern bank accounts and loans are interest-based, which means devout Muslims cannot use them.
A greater barrier to credit is the lack of trust. Few institutions will loan money to people with no credit history. Most of the world’s poor have no credit history because they have never had a bank account.
Rubius’s Smart Escrow and Smart Loan are a Possible Solution
Rubius Inc., a fintech software startup, is growing into futuristic banking institution. They’re developing a suite of trustless financial products. The company aims to make credit accessible to the poor with its proposed Smart Escrow and Smart Loan applications.
Smart Escrow and Smart Loans utilize Ethereum Smart Contracts and Rubius’s Aryl wallet to make trustless credit a reality. Anybody would be able to create a Smart Escrow or Loan contract with Aryl.
The Rubius Smart Loan (RSL) is a trustless solution because it contains a built-in automatic repayment mechanism. Trustless solutions extend credit to the poor by eliminating the need for credit checks and banking history.
The RSL contract is designed to guarantee repayment of the loan. Here is a possible example of how Smart Loan might work:
1.) John opens his smartphone and accesses the Aryl app, planning to borrow $100 from his friend Muhammad.
2.) John will input the loan parameters like contract length, amount of money, etc., then submit the contract to Muhammad.
3.) Muhammad accepts reviews the proposal and accepts the loan, and the smart contract is automatically deployed to the Ethereum blockchain.
4.) The funds are then sent from Muhammad’s wallet to John’s.
5.) After the contract length expires, the funds will be automatically returned to Muhammad from John’s wallet.
The Rubius Smart Escrow (RSE) would work similarly, with the Smart Contract acting as holding vehicle for funds between two parties. Rubius CEO Joseph Rubin stated that “Although there are many issues that could arise with these contracts, they could easily be fixed by having the users pre-select another friend/contact to acts as an arbitrator of the agreements.” The arbitrator would be a neutral third-party who would settle any disputes that arise between the lender and borrower.
The full details of the RSL and RSE have not yet been worked out, Rubin admits, however the team plans to perfect the applications in early 2019.
The Smart Escrow and Smart Loan will most likely be paid with a cryptocurrency like Ethereum (ETH) or Rubius (RUBY) coins.
The Rubius coins are an ERC20 (Ethereum-based) cryptocurrency. That means the Rubius coins can be converted into Ether (ETH) through crypto-exchanges like Rubiex (the trading platform under development by the Rubius team).
How Rubius Smart Escrow and Smart Loan can Help the Poor
The RSE and RSL apps would help poor people by enabling community-based micro lending. People would be able to loan money to friends, family, customers, business associates, and neighbors without a bank and with no interest/fees involved.
Equally important, individuals would be able to make loans to individuals in other nations. Such international lending would be possible because Aryl is a smartphone app designed to offer instant connectivity. Aryl will enable fast conversion of altcoins through the Ethereum blockchain and the Rubiex cryptocurrency exchange.
Smart Loan might enable a person in Florida to lend money to a relative in Cuba. The lender would send the money via the blockchain and set up a Smart Loan contract. The contract would automatically collect the loan payments from the Aryl wallet in Cuba and send it overseas in seconds.
The Smart Escrow and Smart Loan will be very advantageous to Muslims because they can enable interest-free loans. This would allow prosperous Muslims to extend credit to friends, family, neighbors, customers, or business partners without charging interest.
Transforming the Poor into Consumers
An obvious use of Smart Escrow is making more consumer products available to the poor. Companies would set up Smart Escrow installment plans that would enable people to purchase goods.
Items that might be purchased with Smart Escrow include vehicles, farm machinery, solar electric systems, sewing machines, appliances, electronics, and real estate. Smart Escrow has the potential to transform the unbanked from charity cases into consumers.
Smart Escrow and Smart Loan could change lives by enabling poor families to purchase inventory or equipment for a business. A woman might buy a sewing machine so she can earn extra money sewing for her neighbors, for example.
The Difference Between the two Products: RSE & RSL
These two applications are closely-related products. The Smart Loan is a loan guaranteed by a Smart Contract, while the Smart Escrow provides escrow services between two-parties. One key difference is that interest can be charged with the Smart Loan. However, interest-charging is an optional parameter that the users can pre-select.
Smart Loans would be an excellent means of making consumer credit available to the unbanked. Both apps will have the option to utilize an arbitrator to settle disputes or they could simply have two parties.
Smart Loans and Smart Escrow are just two of the many disruptive products Rubius is planning to create. Rubius’s goal is to create a blockchain ecosystem that will serve as the basis of a new world bank and a new banking system.
This next-generation banking system is designed to be more inclusive and to serve everybody, including the unbanked. To build that system, Rubius is recruiting many strategic partners such as the World Coin Network. Partnering with Rubius will give organizations like World Coin access to cutting-edge solutions such as Smart Escrow, Smart Loans, and Aryl.
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