This article was written by Ivo Jeník, Sonia Arenaza, Mehmet Kerse, Haocong Ren. The original article was published by the CGAP. You can find the article here.
The buying and selling of goods looks markedly different today from what it did just 30 years ago. The process is increasingly digital, and so are the goods and services traded. Tokenization – the process of representing real-world assets (real estate), digital assets (intellectual property), or financial claims (bonds) as digital tokens on a blockchain, often with embedded smart contracts that allow for automated execution of pre-defined functions (e.g., payout upon delivery) – represents a new frontier.
The possibilities that arise from tokenization have generated excitement in tech circles and beyond. But so far, its relevance for financial inclusion has been largely unexplored. Tokenization is useful in reducing coordination and transaction costs in already digitized systems. Its helpfulness in solving structural problems deeply rooted in the physical world is more limited and yet to be tested at scale. Could tokenization help address some of the key financial inclusion challenges facing the world today? To answer the question, we’ve outlined below several potential use cases – some have shown early signs of delivering real impact while others are still more experimental.
The most immediate and scalable financial inclusion application of tokenization lies in cross-border remittances. For migrants sending money home, traditional services are often slow and expensive — fees averaging 6–7% of sent amount globally consume a significant share of funds that families depend on. The dominant live architecture is not consumer-to-consumer stablecoin transfer, but what practitioners call the sandwich model. In this scenario, consumers continue to transact via familiar cash-in/cash-out channels at both ends, while stablecoins handle backend settlement between money transfer operators (MTO). MoneyGram’s integration with Circle’s USDC on the Stellar network is the clearest scaled example.
This type of use case leverages the efficiency gains of blockchain settlement at the operator level – lower cost, 24/7 availability, and near-instant finality – where operators can flow through to end-user pricing after off-ramping costs. For more digitally connected populations, consumer-facing wallet models are beginning to allow recipients to hold stablecoins directly, adding a store-of-value dimension alongside transfer.
Tokenization enables innovation in how money reaches individuals. Government-to-person (G2P) transfers – i.e., social benefits, subsidies, and conditional cash transfers – are a natural application. Programmable tokens can carry spending rules embedded directly in code, ensuring funds reach intended beneficiaries and are used for designated purposes without requiring manual oversight or layered intermediaries.
The most active pilots have been in humanitarian and disaster relief. Organizations such as the UN and Mercy Corps have piloted blockchain-based systems that distribute aid directly to the mobile wallets of displaced populations, bypassing traditional intermediaries and reducing the risk of fraud or diversion. The UN’s Stellar Aid Assist program and Mercy Corps’ USDC-based pilot in conflict zones demonstrated meaningful reductions in transfer time and cost compared to conventional aid delivery, while improving traceability for donors and accountability for recipient organizations.
Before individuals can access financial services, they need to prove who they are. Yet approximately 850 million people worldwide lack a formal identity, a major barrier to their financial inclusion. In this context, it is important to distinguish between foundational identity systems, which establish legal identity for regulatory purposes, and emerging digital credential layers.
Verified credentials (VCs) are a cryptographically secured attestation issued by a trusted third-party proving one’s attributes (e.g., age), ownership, or qualifications. Using decentralized identifiers (DIDs) issued as tokens, individuals can hold their credentials in a way that is secure and allows portability and better data protection due to the selective disclosure functionality (proving attributes without exposing full personal data). For example, a gig worker can carry verifiable proof of employment and income across borders, and a micro-enterprise can present an audited transaction record to a lender in a jurisdiction where it has no credit history. Additionally, VCs allow for the use of alternative data for know-your-customer (KYC) standards.
Despite the potential benefits, the practical utility of VCs depends on whether financial institutions and regulators accept them for defined purposes such as KYC, onboarding, or transaction authorization.
Businesses often struggle to obtain loans because lenders cannot easily verify or enforce collateral. Tokenization of real-world assets such as invoices, purchase orders, and inventory offers a promising alternative. A small supplier, for example, can tokenize a pending invoice and sell it to an investor immediately — rather than waiting 90 days for a corporate buyer to settle — providing instant working capital. Assuming interoperability of the tokenization rails, these token-based collateral can be used by small businesses to secure financing from a global pool of investors through crowdfunding platforms, rather than being confined to local banks with high interest rates. If implemented responsibly, these systems could reduce information asymmetry and enable new forms of asset-based and market-based lending. Similarly, smallholder farmers can tokenize their land, crops, and stocks, using them as digital collateral to obtain loans, including based on the value of the future yield.
Beyond collateral, tokenization enables real-time tracking of agricultural produce along the value chain. Increasing transparency and traceability opens the door to direct farmer-to-investor funding, reducing reliance on intermediaries. Collaborative programs such as Agrotoken in South America have begun to demonstrate the viability of this model.
Parametric insurance enhanced by tokenization offers a solution to the underinsurance challenge among low-income populations. Parametric policies use real-world data feeds to trigger automatic payouts when predefined conditions are met (e.g., rainfall falls below a threshold indicating drought), significantly reducing the underwriting cost and time to payout. The smart contract feature that comes with tokenization offers one example of how the parametric aspect can be implemented (e.g., the Lemonade Foundation’s Crypto Climate Coalition project in Kenya). For populations who have historically distrusted or cannot afford formal insurance, this could shift their view of insurance and improve their resilience.
Carbon markets allow entities that reduce greenhouse gas emissions to sell credits to buyers seeking to offset their footprint. Participation in these markets has traditionally been limited to large-scale projects due to high transaction and verification costs. Tokenization can be used to create carbon credit markets for small-ticket items, making them accessible to smallholder farmers engaged in sustainable agricultural practices, creating an entirely new stream of income.
Instead of requiring large upfront investments, assets such as real estate, infrastructure, or private funds can be divided into small digital tokens that represent partial ownership. This could lower minimum investment thresholds, allow smaller investors to diversify portfolios, and expand access to previously illiquid assets. However, inclusion benefits depend heavily on distribution channels, the suitability of products, investor protections, and regulatory frameworks. Without these, tokenized assets may simply broaden access for wealthy investors rather than underserved populations or expose retail investors to risks they are ill-equipped to manage.
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