FinTech Note is a World Bank Group (WBG)series that explores the role of FinTech (the confluence of'finance' and 'technology') in economicdevelopment, with an emphasis on financial inclusion. Thepurpose of this note is threefold. First, by bringingtogether in single resource key technological, economic, andlegal aspects of smart contracts (sections 3-5), the noteserves as a high-level reference on the basic elements ofsmart contracts. It equips local policymakers and WBG staffwith the requisite foundation to effectively brainstormabout smart contracts' productive use in localeconomies. Second, the note discusses select policyconsiderations (section 6) that local authorities, standardsetting bodies, and international organizations will need toevaluate in order to ensure smart contracts'responsible and effective deployment in retail and micro,small, and medium enterprise (MSME) finance. The notefocuses on financial consumer protection, customer duediligence, key legal determinations, standardization andvetting, and data source automation. Finally, the noteanalyzes smart contracts’ potential applications in retailand MSME finance (section 7), focusing on supply chainfinance, insurance, and consumer credit. It discusses theextent to which smart contracts could facilitate incrementalfinancial inclusion gains and the changes they wouldintroduce to these products. To this end, the Annex furtherexamines the changes smart contracts could bring to twospecific microfinance products, a weather index insurancepolicy and a mobile money-based, short-term unsecured loan.
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