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Indian State Telangana uses Blockchain for unregistered credit scores
12 January 2019 of Akshay Makadiya
The Indian state of Telangana has launched a blockchain pilot program in collaboration with Cognito Technologies, based in Korea, to offer credit ratings to the local non-shelved population. The move is another leap for the state in its attempt to become the blockchain capital of the country.
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Towards the construction of a credit history for Unbanked With Blockchain
The Telangana government will work with Cognito Technologies to establish a credit scoring system for an economically weaker part of the state's population using blockchain technology.
For the collaboration, Cognito Technologies will collaborate with Stree Nidhi, a government-backed organization offering low-cost microfinance, to extend the project to self-help groups in the state. The group directs the flow of money lent by governmental banks to the unallocated population.
According to Murali Mohan Reddy Duvvuru, co-founder of Cognito Technologies, the Hong Kong-based company will implement the blockchain technology within the already established Stree Nidhi digital microfinance system.
The partnership will see Cognito Technologies open an office in the state capital of Hyderabad, and the company is set to hire a staff of 15 people there to get started. Meanwhile, Stree Nidhi and Cognito are looking for a suitable district to start the blockchain process.
Starting in April, the pilot program will use smart contracts to record loan payments and repayments on a distributed ledger.
The first phase of the pilot project aims to cover over 10,000 citizens. Participating members will be assigned credit ratings based on the transactions recorded on the blockchain.
"The entire process of loan disbursement and repayments will be recorded on blockchain registries using smart contracts," said Duvvuru.
"As a result, the single credit rating will be derived from transactions recorded and archived on blockchain and people will be made aware of their credit score."
Can the pilot go anywhere?
If successful, the pilot could catalyze similar programs that spread throughout the state.
The co-founder of Cognito, Duvvuru, said that a good credit score will traditionally be flanked by the banking system. The idea is to make it easier for the citizens of Telangana everyday to guarantee cheaper loans.
In addition, Telangana IT and industries chief secretary Jayesh Ranjan sees the value in the use of blockchain to create an immutable and hack-proof registry.
"Blockchain is the most appropriate tool to implement here," Ranjan said.
Can blockchain technology help the non-rented population to protect micro-loans? Or is there a better way for such a system? Share your opinions in the comments section below.
Images via Pixabay
