Agricultural economist Adedapo Alawode has said decentralised finance (DeFi) has the potential to transform financial inclusion in Nigeria.

According to him, DeFi can provide accessible, transparent, and efficient financial services to underserved populations, bridging the gap in financial inclusion and promoting economic growth in Nigeria.

In a statement made available to The Guardian, Alawode lamented that despite accounting for approximately 57.7 per cent of the country’s GDP and employing almost 80 per cent of the labour force, Nigeria’s informal economy lacks access to formal financial services.

He said Decentralised Finance (DeFi) can bridge this gap by providing financial services such as lending, borrowing, and insurance through blockchain technology.

According to him, DeFi platforms can offer microloans, microinsurance, and digital savings models, increasing financial inclusion and stability for informal sector workers.

The platform, he said, can digitise traditional savings models like ajo, esusu, and adashe, thereby reducing fraud and improving trust among members.

He noted that it can also facilitate faster and cheaper international transactions, increasing disposable income for informal households.

His words, “Decentralised Finance (DeFi) is rising as one of the most tumultuous technologies the world over, and has already received serious consideration in developed economies. However, its prospective impact remains largely undiscovered in Nigeria’s informal financial sector, being the central cohesion of the country’s economy. With the use of DeFi lending platforms, informal enterprise owners can access microloans without the traditional collateral; with just digital identity systems and blockchain credit profiles to assess risk, reducing reliance on informal lenders who normally charge unnecessarily high interest rates.

“As the informal financial sector is strenuously scrambling to access formal banking services, DeFi can also digitise traditional ajo, esusu, adashe and bam savings models through smart contracts. These traditional tools can be automated to increase transparency and integrity, reduce fraud, and improve trust among members, ensuring fair, timely benefits of funds for members. It also comes with faster, easier and cheaper international movements using stablecoins, thereby doubling the disposable income of informal households.

“Decentralised Finance will pave the way for a bold new engagement for financial inclusion in Nigeria. A society where the informal financial sector has taken over as the economic backbone of millions, innovative financial tools like DeFi should be embraced to transform lives and boost national productivity. However, the realisation of these benefits can only be made possible through a balanced approach that nurtures innovation while protecting the most vulnerable.”