Blockchain technology can help Small and Medium-sized Enterprises (SMEs) in the Caribbean region get access to capital and overcome other obstacles to growth, according to a new report commissioned by Compete Caribbean and the Inter-American Development Bank (IDB).

The report says that although SMEs are a major contributor to the region’s economy, generating over 50 per cent of its GDP annually, many are unable to access credit through traditional banking institutions – either because they cannot provide the necessary collateral, complete the documentation required or are considered too high risk.

Blockchain technology could bridge this finance gap by creating a new credential management system that would collect and store data in a cost-effective, secure and innovative way, according to the report.

Project researchers suggest that a Self Sovereign Identification (SSI) system could provide credit-worthiness indicators of SMEs for banks and alternative financiers, but emphasise that it would require partnering with government bodies to ensure data sharing takes place in an appropriately regulated environment.

Compete Caribbean, which is partnering with the London School of Economics to conduct research into this area and help devise a new system for assessing the credit-worthiness of SMEs, also called for greater public education around FinTech in general and blockchain technology in particular.

Blockchain operates on a peer-to-peer platform, meaning that information is never centralised. This distributed format allows users to store and retain their data, allaying privacy concerns. It also makes the system more resilient to cyber attacks.

A blockchain SSI system would allow SMEs to securely provide a broader range of payment data which, in turn, would help lenders assess and mitigate their risk.

While still relatively new in the Caribbean region, blockchain has seen some innovative applications.

Last month, Bahamas firm PO8 launched its blockchain ecosystem for the marine archaeology industry, tokenizing underwater expeditions for historical artefacts, which will then be digitized and auctioned.

The government is also keen to incorporate the technology into various sectors, from financial services to developing a comprehensive land registry.

Speaking at a workshop earlier this year, Deputy Prime Minister Peter Turnquest said: “When people think about blockchains they think about cryptocurrency. That is just one aspect of it. More important than that is the way we can use this technology to improve the quality and efficiency of our daily lives.”