Much of the attention of the blockchain world is focused on the highs and lows of cryptocurrency values. Startups love FlexID remind us that distributed ledger technology has the potential to play other roles, including providing trusted data from identities without the need for centralized authority.
One of the startups working on this vision is Zimbabwe’s FlexID, which is building a blockchain-based identity system for those excluded from the banking system due to their lack of identity documents. The idea of FlexID has won funding from Algorand, a blockchain protocol created by Turing Award-winning cryptographer Silvio Micali. The two parties have not disclosed the size of the investment.
African countries have made great strides in promoting financial inclusion over the past decade, but it is still in its infancy. According to World Bank estimates for 2021, more than 60% of adults in sub-Saharan Africa do not have a bank account.
A few years ago, the numbers were bigger. In Zimbabwe, for example, in 2014 only 30% of the adult population had access to financial services. The number of bank accounts in the country stood at 1.5 million in 2016.
There is a common belief that increasing access to financial services in a country improves people’s economic well-being. And that’s what the Zimbabwean government was trying to achieve when they launched a… financial inclusion scheme from 2016 to 2020†
The effort met with some success: the percentage of Zimbabwe’s adult population with access to financial services rose to 55%, while the number of bank accounts increased to 8.5 million in 2020†
However, there is still much work to be done in this area. When people have little or no confidence in the financial system, or they don’t know that certain financial services that meet their needs exist, or they don’t have formal identification documents to seek out these services, achieving optimal financial inclusion can be huge. .
These are issues that affect Africa and emerging markets, not just Zimbabwe. FlexID’s Self-Sovereign Identity (SSI) platform takes a decentralized approach and gives users control over their personal information – not common in Africa, where other entrants offer centralized solutions such as Smile Identity, YC-supported Identitypass and Dojah.
With funding from Algorand, FlexID aims to make its decentralized identity network available in emerging markets where an estimated one billion people lack formal identification. Announcement† Zimbabwean serial entrepreneur Victor Mapunga founded FlexID in 2018 out of frustration with the banking industry.
FlexID gives users a blockchain wallet that stores their verifiable credentials. Verification is done on-chain through Algorand, which bills itself as a solution to the blockchain trilemma of security, scalability and decentralization. FlexID will also integrate with other Algorand decentralized apps (dApps).
Algorand’s FlexID investment comes at a time when African blockchain startups are raising huge amounts of money from investors. A recent report said more than 40 African blockchain startups raised a total of $127 million by 2021. Some dazzling investments have already taken place this year, such as Mara’s $23 million starting round from investors such as crypto exchange giants Coinbase and FTX.
While FlexID offers service in the identity space, the umbrella sector that the solution and most blockchain platforms fall under is fintech. Companies like FlexID are reducing people’s reliance on cash and crypto remittance fees, lowering the barriers to setting up an account through crypto wallets, and tackling the continent’s documentation challenge.