Confirming a customer’s identity is an ongoing pain point for banks and financial institutions around the world. It’s an even bigger challenge for countries that have high underbanked populations like Sierra Leone.

According a recent estimate from the Sierra Leone government, just 20% of its citizens have a bank account, which perpetuates a chicken-and-egg problem of a lack of documented financial history holding a customer back from being able to open an account. However, as of this week, Sierra Leoneans can verify their identities through thumbprints that link back to a central database, thanks to a blockchain-based digital identity solution that records all credit events on a single ledger.

Kiva, a San Francisco-based tech nonprofit that offers micro-loans, has worked with the Sierra Leone government for the past two years to build a digital identity system that banks can use to verify individuals’ identities. Bank Innovation spoke to Kiva’s chief strategy officer Matthew Davie on how the the system works.

In building the digital identity solution, what was the major problem that Kiva and its partners were looking to solve?
Before, if you wanted to open a bank account, you might get asked for 10 [identity] documents, you may have none of them and, even if you had them, it would take two weeks. In the formal financial sector, you’ve got to pass the KYC check and, on certain levels, you’ve got to pass an AML and CFT (anti-money laundering and terrorism financing) check. Banks also need to be able to [assess] risk in order to move compliant money down stream. You might know me from my village, but you have no idea if five minutes ago I took out another huge loan from someone else.

I understand that the Kiva Protocol, the digital identity solution developed with the Sierra Leone government, links back to a central database of individuals’ identities. How does that work?
Over the past five years, primarily with the UNDP, Sierra Leone undertook a National Civil Registration Act, which created a National Civil Registration Authority that helps mobilize and consolidate all of the infrastructure to be able to actually register and issue identities. So they had done that foundational work.

So, the Kiva Protocol helps connect individuals’ biometric information with the identity database that’s already been set up? Can you walk me through the process?
It’s very boring, actually, but it’s very powerful. If I show up at a bank [in Sierra Leone] now, I can literally thumbprint in and put in my national ID card, and it will be able to make a call to that identity issuer in Freetown to verify my identity, come back with the KYC check and send any updated identity information to that financial service provider.

What type of blockchain solution did you use to underpin the Kiva Protocol?
We worked with the Linux Foundation on an open-source distributed-ledger technology called Hyperledger. They have one built for identity called Hyperledger Indy, and that’s the foundation of the identity component. Then we built [everything] all open source on top of that.

We tested every single private and public blockchain and distributed system out there before we settled on Hyperledger. We decided on that for a bunch of reasons, the least of which is it’s open source, which means there’s no vendor lock in. In addition, it’s done in a way that’s compatible with national systems, meaning it’s not pegged to any cryptocurrency.

Why do you think this kind of digital identity verification system hasn’t caught on in the U.S.?
One of the biggest challenges in the developed world is that there is a system —  no matter how much you poke holes at it —  that broadly works. There’s a lot we could do to fix things, not have Equifax-type data breaches and have an identity check or credit check that’s cheaper and more secure. At the root of it, however, there’s an existing, entrenched system, and I think that will be one of the larger challenges in the developed world.