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Banking & Finance

Blockchain proves successful in Myanmar microfinance test

Infoteria CEO Yoichiro Hirano, right, watches the demonstration of blockchain technology at BC Finance, the biggest microfinance company in Myanmar.

TOKYO -- An experiment to create a low-cost and highly reliable blockchain infrastructure to record financial transactions is gathering steam in Myanmar.

Blockchain is a distributed database that maintains a continuously-growing list of data records that are difficult to tamper or revise. The technology serves as the public ledger of transactions using the virtual currency bitcoin.

Infoteria, a Japanese software developer, said last month it has successfully demonstrated the application of the blockchain system to microfinance services in Myanmar for the first time in the world, recording financial transactions for low-income people using the technology.

A blockchain can be built "at a cost less than one-tenth" of that needed to create a conventional database, said Yoichiro Hirano, president and CEO of Infoteria, which plans to put the technology into commercial use within a year or two.

The experiment was conducted on the computer system of BC Finance, Myanmar's biggest microfinance company, which is based in Yangon.

The blockchain technology stores data processed through a distributed network of computers on the internet, all using the same program, in blocks that hold batches of validated transactions. Blocks are then linked together like a chain, reinforcing the structure. 

Tampering of information in a conventional database is difficult, but can be readily done if the authority of the system's manager is stolen. In contrast, the revision of data in a blockchain is nearly impossible, even by its manager, because multiple computers verify every transaction occurring on the system, effectively keeping tabs on each other. 

The technology also realizes drastic cost cuts because it creates highly reliable systems using inexpensive cloud computing.

A good start

Infoteria turned to Myanmar's microfinance sector because the hurdles against application of the technology are relatively low.

For example, the introduction of blockchain technology at Japanese financial institutions is difficult because they already have highly advanced accounting systems in place. Even if blockchain experiments can be successfully demonstrated, more than five years would be needed to introduce the technology in place of the existing systems, Hirano said. 

In contrast, Myanmar does not have advanced financial infrastructures, as evidenced by the country opening its first stock exchange only this spring. Branches of microfinance companies manage data with spreadsheet software in the absence of specialty systems. Transactions are small in scale, creating a favorable environment for the introduction of blockchain technology. 

"As a major achievement of our successful demonstration experiment, we could confirm that cloud-computing environments are workable in Myanmar," Hirano said.

Because of a lack of confidence in Myanmar's internet infrastructure, due to blackouts that sometimes occur and the low quality of local circuits, a data center in Japan was used for the experiment. The successful results proved that Myanmar's cloud-computing environment could handle the blockchain technology. Infoteria is thus considering using data centers in Singapore and India for the system.

Infoteria plans to continue running demonstration tests on data records until August, before launching joint projects with other companies to develop programs such as a management system for users of microfinance services. 

As the blockchain technology is not suitable for services that require frequent rewriting of data, conventional database systems are needed to manage such users. Infoteria plans to utilize its advanced data-linking software to connect user management systems with blockchains.

If the technology proves commercially applicable in Myanmar, Infoteria will expand the initiative to other emerging-market nations, Hirano said.

(Nikkei)

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