Blockchain for Microfinance Institutions: A Feasibility Study

[GENERAL] Name and surname of main applicant

Stella Seyram Dzandu

[GENERAL] Are you delivering this project as an individual or as an entity (whether formally incorporated or not)

Individual

[GENERAL] Please specify how many months you expect your project to last (from 2-12 months)

7

[GENERAL] Please indicate if your proposal has been auto-translated into English from another language

No

[GENERAL] Summarize your solution to the problem (200-character limit including spaces)

We propose a feasibility study to ascertain whether the use of blockchain tech could serve as the solution that can eliminate challenges of microfinance institutions and finally improve loan quality.

[GENERAL] Does your project have any dependencies on other organizations, technical or otherwise?

No

[GENERAL] If YES, please describe what the dependency is and why you believe it is essential for your project’s delivery. If NO, please write “No dependencies.”

No dependencies

[GENERAL] Will your project’s output/s be fully open source?

Yes

[GENERAL] Please provide here more information on the open source status of your project outputs

Adopting technology for microfinance is key in today's business and therefore work on this project would be made public for many to see and offer contributions where possible

[METADATA] Horizons

Financial Services

[SOLUTION] Please describe your proposed solution

The loan portfolio is the most valuable asset for microfinance institutions, but it has often highlighted strategic, operational, technological, and market inefficiencies. Many of these issues arise from a manual approach to managing client onboarding, loan disbursement, and collection. This reliance on manual processes leads to inefficiencies that negatively impact loan performance and the institution's overall profitability. Additionally, manual methods can result in cash suppression, poor financial and client decision-making, high field costs, and increased burdens on both clients and staff.

Over the years, microfinance institutions in Ghana, categorized into Tiers 1-4, have sought suitable software solutions to improve their operations. However, most of the software are either commercially purchased or developed by individuals who lack a deep understanding of microfinance and the specific risks involved. Furthermore, there have been instances where over 100 microfinance companies lost data stored in the cloud with a service provider.

In 2018 the Bank of Ghana closed down numerous microfinance institutions in Ghana primarily due to several interrelated factors and these are presented:

a. Insolvency: A significant number of these institutions were insolvent, meaning they couldn’t meet their financial obligations. This was often due to poor financial management and inadequate capital.

The poor financial management and inadequate capital only point to the fact that loans that have been disbursed did not get repaid as they should, therefore resulting in the erosion of the capital of the institution as well as losses of the savings of poor savers.

b. Regulatory Violations: Many institutions failed to comply with regulatory requirements put in place by the Bank of Ghana. Despite multiple warnings and opportunities to rectify these issues, they did not make the necessary changes.

Given the absence of a strong system that can support the required change that the Microfinance institutions need or reliable technology that can provide an easy way of dealing with areas of weaknesses, the possibility of not being able to comply with the Bank of Ghana requirements are high and therefore the closedown of these institutions.

c. Fraud and Mismanagement: Some institutions were involved in fraudulent activities or misused depositors’ funds, which further eroded trust and financial stability.

Microfinance institutions have not been successful at resolving these problems entirely and thus the need for them to be resolved in a more robust manner.

We are proposing the launch of a feasibility study to assess how the Cardano blockchain technology can address these identified challenges, either through the development of user-friendly software for computers and mobile devices or by creating an application to enhance field operations.

This project would engage

b. 30 Microfinance Companies

c. 3 Fintech Companies

d. Executive Secretaries of these Umbrella bodies of the various tiers.

1. The Ghana Microfinance Association Network
2. Ghana Association of Microfinance Companies,
3. Micro Credit Association Ghana
4. Financial Non- Governmental Organisations

Scoping activities will be done across regions depending on data and access.

We will measure the impact of this project by:

a. Assessing how effectively Cardano can address the identified challenges.

b. Evaluating the scalability of the solution across the microfinance sector and its adaptability to regulatory changes.

c. Collecting and analyzing feedback from stakeholders to gauge their willingness to adopt the proposed solution.

Our Approach

 

STAGE 1: INCEPTION MEETING AND INITIAL ANALYSIS (MONTH 1 & 2 )

1.1 Inception Meeting with Executive Director of Ghana Microfinance Institution’s Network (GHAMFIN)

1.2 Review specific challenges in the Ghanaian microfinance industry, ranging from infrastructure to processes to legal and regulatory to data management; identify potential regulatory challenges or enablers.

1.3 Analyse how the Cardano blockchain could potentially address these issues.

1.4 Develop a brief to map the key challenges to using blockchain to solve the problems.

1.5 Define the scope of blockchain applications suitable for solving the identified problems.

 

 

STAGE 2: STAKEHOLDER ENGAGEMENT AND DATA MANAGEMENT (3 -5 MONTHS)

 

2.1 Identify key stakeholders for the study from amongst MFIs, MFI Clients, Fintech, developers etc)

2.2 Develop a Google quantitative and qualitative questionnaire for interviews to gather perspectives on adopting a blockchain-based digital tool that can respond to identified challenges.

2.3 Conduct preliminary interviews and surveys with selected target groups.

2.4 Develop a Stakeholder Engagement Report with cases.

 

STAGE 3: INDEPTH ANALYSIS AND DEVELOPMENT OF FEASIBILITY REPORT (6 MONTHS)

Develop a feasibility report with proposed contents as follows:

 

3.1 Feasibility results on suitability of Blockchain platforms suitable for resolving the identified challenges.

3.2 Estimated costs and potential benefits of developing a digital tool

3.3 Legal and regulatory landscape review results on blockchain in Ghana

3.4 Compile findings and assess overall feasibility.

3.5 Develop a feasibility report

3.6 Organise a Validation Session with Stakeholders on findings

3.7 Prepare Final Feasibility Report and Close Out Report

 

STAGE 4: CLOSE OUT-REPORT

 

4.1 Preparation of close-out documents and videos

[IMPACT] Please define the positive impact your project will have on the wider Cardano community

The success of the project would bring this value to Cardano

a. Increase in number of use cases, particularly in relation to the microfinance sector of Ghana

b. Awareness creation of Cardano and its activities

b. Block chain-based innovative product for the financial sector in Ghana.

We measure the impact by:

a. the number of institutions who can migrate unto the system if developed and designed.

b. approval of adequacy of the software as good for microfinance data management.

Our outputs would be shared with the Cardano community via project reports to Project Catalyst.

[CAPABILITY & FEASIBILITY] What is your capability to deliver your project with high levels of trust and accountability? How do you intend to validate if your approach is feasible?

Stella Seyram Dzandu has over 12 years of experience working with microfinance companies as a consultant in the capacity of institutional assessor, process mapping, risk management

Stella has managed funds under fund 11 Feasibility Study on Creating a Blockchain Based Information Platform for NGOs. We have delivered on our milestones as expected. We are on our last milestone.

Faakor Fiadzigbey

Faakor has been part of the Cardano community since Fund 8 during which she was a Community Assessor (CA). She was also a challenge team member for the Grow Africa, Grow Cardano challenge in Fund 8 and a CA in Fund 9 as well. She is a Human Resources Management Practitioner by profession.

Faakor also managed funds under:

a. Feasibility Study on Creating a Blockchain Based Information Platform for NGOs (Final milestone).

b. Reaching the Francophone Community in Ghana (Successfully Closed)

[PROJECT MILESTONES] What are the key milestones you need to achieve in order to complete your project successfully?

MILESTONE 1 (1-2 Months)

The main activities required to achieve Milestone 1 Output include:

1. Making contact with the Executive secretary of the Ghana Microfinance Finance Network (GHAMFIN) to ascertain from supervisory perspectives the state of the challenges of the institutions and to introduce the project.
2. Review and analyse the microfinance landscape of challenges and the potential of the Cardano blockchain to address these issues.
3. Develop a brief that maps the key challenges to using blockchain to solve the problems whilst defining the scope of blockchain applications suitable for solving the identified problems.

Milestone 1 Acceptance Criteria

Mapping Brief

Milestone Evidence Milestones Completion

Submit Mapping Brief to Project Catalyst

 

MILESTONE 2 (Month 3-5)

The main activities required to achieve Milestone 2 Output are presented

1. Conduct a scoping exercise on the potential participating Stakeholders (20 MFIs); Clients (30), and Fintech Providers (3), Executive Secretary of Microfinance Associations (4) with a total of 28 Institutional representatives. A minimum of 25 institutional interviews
2. Develop a Google quantitative and qualitative questionnaire for interviews.
3. Conduct preliminary interviews.
4. Develop a Stakeholder Engagement Report which will comprise analysis and interpretation of findings.

Milestone 2 Acceptance Criteria

1. Scoping document comprising details of potential respondents and coverage
2. Google questionnaire
3. Stakeholder Report.

Milestone 2 Evidence Milestones Completion

Submit documents to Project Catalyst

MILESTONE 3 (Month 6)

The main activities required to achieve Milestone 3 Outputs are presented

1.Compile findings from each stage.

2.Develop a comprehensive feasibility Report based on the reviews, analysis, study and also include:

a. Estimated costs and cost benefit analysis.

b. Critical Success Factors and KPIs for project implementation

3.Organise a Validation Session with Stakeholders on findings

4. Prepare Final Feasibility Report

Milestone 3 Acceptance Criteria

1. Validation Session presentation slides
2. Final Feasibility Report
3. Workshop Pictures

Milestone 3 Evidence Milestones Completion

Submission of validation session presentation slides, final feasibility report, workshop pictures to Project Catalyst.

Milestone 4: FINAL MILESTONE (Month 7)

 

4.1 Preparation of Project Close-out Report and Video

[RESOURCES] Who is in the project team and what are their roles?

On this proposal the roles and team members are presented

a. Stella Seyram Dzandu - Team Lead and Business Analysist

b. Faakor Fiadzigbey - Organisational Diagnostic and Research Assistant

Disclosure of role and scope of services on past projects

Stella is a member of the Cardano community and a training and business planning Consultant. She has qualifications in business administration and 15 years of experience in educating and strengthening Microfinance Institutions and Associations design of various interventions in collaboration with relevant and regulatory bodies as part of a group of consultants. She has deep understanding of the Microfinance operations in Ghana and key challenges they face.

Stella Seyram Dzandu is the Team Lead on a proposal ' Feasibility Study to create a blockchain based information platform for NGOs" , a project which is currently near completion.

https://www.linkedin.com/in/stella-myers-481bb315/

Faakor was responsible for facilitating Meeting Workshops and Report writing on the project Feasibility study to develop a block chain-based platform for NGOs in Ghana. She was also the main Lead on the project 'Reaching the Francophone Community in Ghana" a fund 10 funded project.

Faakor has been part of the Cardano community since Fund 8 during which she was a Community Assessor (CA). She was also a challenge team member for the Grow Africa, Grow Cardano challenge in Fund 8 and a CA in Fund 9 as well. She is a Human Resources Management Practitioner by profession.

Telegram: @Fax660

https://www.linkedin.com/in/faakor-fiadzigbey-b9b09328/

[BUDGET & COSTS] Please provide a cost breakdown of the proposed work and resources

[VALUE FOR MONEY] How does the cost of the project represent value for money for the Cardano ecosystem?

Project Overview and Strategic Value to Cardano

This project presents significant value to Cardano by addressing a critical challenge faced by financial service providers, particularly in the Ghanaian market. Innovation within financial services is a core focus for Cardano, and this initiative aims to enhance Cardano’s blockchain alignment with the needs of this sector. By penetrating this space, the project seeks to improve key performance indicators and foster broader adoption of blockchain technology within the financial landscape, specifically in the Ghanaian context.

Budget Considerations

The proposed budget has been carefully structured to reflect the current economic conditions in Ghana and the performance of ADA (Cardano's native cryptocurrency). This ensures that the project is financially viable and avoids potential constraints during execution.

Blockchain Technology Introduction

Introducing blockchain technology to Ghanaian financial service institutions represents a significant milestone. It paves the way for further advancements, including fostering interest among developers to learn and prepare for Web 3.0 integration, ultimately enhancing the ecosystem for future innovations