Blockchain Resolutions for Credit Risk Management in Social Enterprise: Towards Sustainable Poverty Eradication in SAARC

Abstract

Micro-credit is an indispensable tool for supporting low-income households financially and reducing rural poverty. However, the extraordinary services the microloan intends to fund expose it to significant credit risk. This study aims to develop a blockchain alliance system for anti-poverty social microfinance based on the characteristics of blockchain technology and the microfinance's specific credit risk. This system contains the mechanism of government and financial institutions for poverty alleviation, and it improves the management of the credit risk of social microfinance for poverty alleviation by determining the positioning and clearing regulations of the system's operation. This study undergoes rigorous pilot testing with a preliminary sample of 650 respondents representing diverse demographics and operational contexts within the social enterprise ecosystem to analyze the current development of social microfinance and how blockchain technology designs the unique advantages of social microfinance. It also has applications in the field of finance, and it applies the theory of asymmetric information and adverse selection to analyze the unique credit risk faced by social microfinance institutions for poverty alleviation in SAARC. The study results indicate that the blockchain system efficiently manages social microfinance credit risk for anti-poverty organizations. The blockchain system can effectively reduce the cost of credit risk management of social microfinance for poverty alleviation, increase credit accessibility for the impoverished, reduce the degree of information asymmetry between the two parties, and reduce the likelihood of adverse selection.