Sierra Leone unveils Africa’s first blockchain online ID platform to capture the unbanked

Sierra Leone has launched a blockchain platform to create online identities for its citizens, making it the first African country to unveil what has been described as a blockchain-enabled digital national identification system.

The platform, which was officially launched by Sierra Leone President Julius Maada Bio in the capital Freetown on Wednesday will allow citizens who find it difficult to get loans to prove their credit history.

“This visionary step here today guarantees that Sierra Leoneans are not excluded from … the global digital economy,” Bio said at the launch.

The national digital identity platform runs on the Kiva Protocol, a digital identification system that uses blockchain, a distributed ledger technology.

According to a report by Devex, the platform was developed by the country’s National Civil Registration Commission with support from Kiva, a nonprofit organization based in San Francisco, as well as, the United Nations.

It is hoped that the initiative will enable Sierra Leone’s citizens to secure loans, establish credit histories and gain access to financial services.

In Sierra Leone, which is one of the poorest countries in the world, more than three-quarters of its seven million citizens lie outside the formal banking sector.

The use of informal financial institutions like community banks and microfinance lenders are therefore common. But the problem is that these institutions have no way of establishing the identity or credit history of borrowers, and therefore they tend to offer loans with very high interest rates to minimise lender risk.

This is likely to change, thanks to the online credit platform.

“The platform works by giving each prospective borrower a digital wallet. Their transactions are recorded on a blockchain ledger, which ensures user information is secure and can’t be tampered with. Lenders will then be able to access citizens’ credit histories by using fingerprints and other biometric data previously collected by the Sierra Leonean Government,” a report by The New Economy said.

Before this initiative, people in Sierra Leone who wanted to open a bank account might have to provide utility bills or information on their credit history, which they might not have.

“Now, they can walk in and because the government has already done all this work around digital ID they can thumbprint in and use national ID card,” Matthew Davie, chief strategy officer at Kiva told Devex. “And through Kiva Protocol’s technology, we can enable in two seconds a KYC check to happen which would normally have taken two weeks.”

Citizens can access the digital wallet using an app, but analysts say this might pose a problem as only 15% of the population has access to the internet. Kiva plans to tackle this by using MiFi devices that can connect to the internet via phone networks.

“Lack of identification, or an inability to verify that identification for credit purposes, increases the cost of business for everyone,” David Sengeh, who heads Sierra Leone’s Directorate of Science Technology and Innovation, told Reuters.

“A national platform … means that companies, institutions, and whoever can verify that what I’m saying about my loan history is (true). Anyone can fake a drivers license, but not a system like this.”

The West African country is at the moment making moves to have all banks and microfinance institutions set up with the system by the end of the year. 

Last year, it was widely reported in the media that Sierra Leone had used blockchain technology during its March 7 general election to tally votes.

Swiss blockchain startup company Agora had said that it was allowed by the NEC to use its blockchain technology to verify votes in parts of the capital Freetown.

But Sierra Leone’s National Electoral Commission dismissed the reports, saying in a tweet that “it has not used, and is not using #blockchain #technology in any part of the electoral process.”