SMEs Dismissed by the Banks, Beginning of the Era of P2P Finance

Karma means your deeds. What you do to create value for yourself in this life and beyond. The real economy is comprised of the deeds of the people who constitute it. Somewhere along the line we’ve forgotten what the economy is all about. We’re lost in a maze of big banks, lawyers, accountants and governmental regulations.

What we need today is a global disruption that would allow all participants in the economic system to get their fair share. According to the International Labour Organization (ILO), global youth unemployment is expected to reach 13.1 percent in 2017; it has already risen from 12.9 percent in 2015. Many of these youth are in developing nations.  

Challenges Worldwide quoted the World Bank in saying that there are 25-30 mln SMEs in emerging economies, which contribute 45 percent of the total employment and 33 percent of the GDP. They estimate that if each SME gave an opportunity to two young people, we could eradicate youth unemployment.

Lack of balance

The problem is who will fund these SMEs in the developing world? The present day system is mired with problems of our own making. Top management salaries are outrageously high. Lucas Chancel, renowned economist, recently brought to light the case of India where the top one percent of earners take up to 22 percent of the total income. The Hindu quoted him as saying that income inequality in the world’s second most populous country is now at its highest level since 1922.

Then there is the issue of banks, which are supposed to lend to make the economy grow but are saddled with huge operational costs, overstaffing and overbearing corporate structures. Banks have been slow to rise to the challenges of the 21st century and are exhorbitantly expensive for ordinary people to use. A large part of the global wealth is also locked away in richer countries with extremely low interest rates or even negative interest rates, while where capital is required is in developing nations with interest rates as high as 20-30 percent.

Developed countries have extremely low deposit rates

Source: World Bank

It is time to unlock credit and potential

Karma is planning to use the power of peer2peer (p2p) technology to provide credit globally. They want to create an ‘economy of trust’. They plan to provide an opportunity for people in developing countries to secure access to credit, and at the same time free up capital stuck in developed countries at low interest rates. In a way, Karma is about creating an economic ecosystem, one in which everyone can work with each other and develop diverse relationships as well as focus on interactions that are mutually beneficial.

Karma will be based on Blockchain and its alpha version will be ready to test by November 2017. The roles that will exist in the Karma ecosystem are those of investors, lenders, guarantors, scoring agents, analysts, sellers, collectors and insurers. Participants can be both individuals as well as legal entities. Participants will be assigned ratings and these would be valuable so as to ensure that the system remains transparent and effective.

What’s interesting about the Karma ecosystem is that unlike traditional lenders, which decide what loan products they will create or support, in Karma that power rests within the community of participants. These participants can support investments on any terms - even request loans on any terms. It will be the market that ultimately decides which loan products are the most successful.

Crowdsale to fuel Karma’s plans

After having held a successful presale and reached a hard cap of $500,000, Karma will be conducting a token sale between 27-29 Nov. 2017. Between Nov. 27 and 28, the sale is only for investors who have passed the know your customer (KYC) process and have been added to the white list.

The tokens on sale are called Karma tokens. If tokens are left over from this sale, they would be available for an open sale on Nov. 29, 2017. The crowdsale is legal in all jurisdictions including United States and China. It should be noted however that only qualified US investors can participate. The basic token price is $0,01 and discounts are available for early investors. A 50 percent discount will be offered till $1 mln is collected, 30 percent until $3 mln and 15 percent until $8 mln. A hard cap of $10 mln is placed on the ICO. Up to 59 percent of the tokens are for investors who participate in the pre-sale and token sale.

Karma tokens will fuel the ecosystem

Karma tokens are central to the eco system that will be created. These tokens will be used to pay all commissions for tasks such as scoring, transaction processing, insurance, collections etc. In order to conduct transactions, participants will be purchasing Karma tokens on exchanges post listing.

Since the supply of the tokens will remain fixed and as the demand for the tokens rises, it’s expected that market dynamics will push the price of the token higher. There are other benefits surrounding the tokens, like priority access to new applications from investors and borrowers for holders of more than 100,000 tokens, and up to 50 percent discount on conducting transactions on the platform.

Karma is putting people front and centre

It’s difficult for people to translate their dreams into reality without the means to do so. If Karma is successful in creating an ecosystem where people can gain access to credit at the parameters that they find comfortable, they will have revitalised and revolutionised the way the global finance system works.

The opportunities for all the stakeholders are immense, whether they be individuals, enterprises like pawn shops, non banking finance companies, lawyers, financial experts or insurers. Karma can free up the flow of credit that is stuck like sludge in the global pipelines.

However, what Karma will do, if successful, will be to build a network of trusted relationships around the world, all fueled by Blockchain technology. One thing is for certain, getting credit should not depend on your fate, but on your deeds and Karma.