Informal Finance
Informal finance refers to financial transactions and services that occur outside of regulated, formal financial institutions like banks and credit unions. It includes activities such as peer-to-peer lending, rotating savings and credit associations (ROSCAs), moneylenders, and community-based savings groups. This system often relies on social networks, trust, and local customs rather than legal contracts or government oversight.
Developers should understand informal finance when building fintech applications for underserved populations, such as in developing regions where formal banking is limited. It's relevant for creating digital tools that support microfinance, community savings, or peer-to-peer lending platforms, helping to bridge gaps in financial inclusion. Knowledge of informal finance can also inform the design of blockchain or mobile payment systems that emulate trust-based networks.