thesis on micro finance

The Impact of Technology on Microfinance

• First Online: 07 September 2021

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• Roberto Moro-Visconti 3  

Part of the book series: Palgrave Studies in Financial Services Technology ((FST))

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After the microfinance background, examined in Chapter 1 , and the microfinance issues, illustrated in Chapter 2 , this chapter analyzes the impact of technology on microfinance. Technological instruments include the digital scalability of lending networks, crowdfunding and peer-to-peer lending, or blockchains for data validation.

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Srinivas and Mahal ( 2017 ).

See Zamore et al. ( 2021 ).

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In cryptography and computer science, a hash tree or Merkle tree is a tree in which every leaf node is labeled with the hash of a data block and every non-leaf node is labeled with the cryptographic hash of the labels of its child nodes. Hash trees allow efficient and secure verification of the contents of large data structures. A Merkle tree is recursively defined as a binary tree of hash lists where the parent node is the hash of its children, and the leaf nodes are hashes of the original data blocks ( https://en.wikipedia.org/wiki/Merkle_tree ).

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There are different types of blockchain: some are open and public, and some are private and only accessible to people who are permitted to use them. A public blockchain is an open network. Anyone can download the protocol and read, write, or participate in the network. A public blockchain is distributed and decentralized. Transactions are recorded as blocks and linked together to form a chain. Each new block must be timestamped and validated by all the computers connected to the network, known as nodes, before it is written into the blockchain. All transactions are public, and all nodes are equal. This means a public blockchain is immutable: once verified, data cannot be altered. The best-known public blockchains used for cryptocurrency are Bitcoin and Ethereum: open-source, smart contract blockchains. A private blockchain is an invitation-only network governed by a single entity. Entrants to the network require permission to read, write or audit the blockchain. There can be different levels of access and information can be encrypted to protect commercial confidentiality. Private blockchains allow organizations to employ distributed ledger technology without making data public. But this means they lack a defining feature of blockchains: decentralization. Some critics claim private blockchains are not blockchains at all, but centralized databases that use distributed ledger technology. Private blockchains are faster, more efficient and more cost-effective than public blockchains, which require a lot of time and energy to validate transactions ( https://www.intheblack.com/articles/2018/09/05/difference-between-private-public-blockchain ).

Electronic money transfers made from one person to another through an intermediary, typically referred to as a P2P payment application. P2P payments can be sent and received via mobile device or any home computer with access to the Internet, offering a convenient alternative to traditional payment methods.

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Oracles ( https://www.mycryptopedia.com/blockchain-oracles-explained/ ) provide additional functionality to smart contracts by providing a means for them to communicate outside of a decentralized blockchain network. Blockchain oracles can take on numerous forms, some of those forms include but are not limited to:

• Software oracles;

• Hardware oracles;

• Inbound oracles;

• Outbound oracles;

• Consensus-based oracles.

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Moro-Visconti, R. (2021). The Impact of Technology on Microfinance. In: MicroFinTech. Palgrave Studies in Financial Services Technology. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-80394-0_4

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THE ROLE OF MICROFINANCE IN POVERTY REDUCTION: The Case of Specialized Financial Promotion Institute (SFPI

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