Fintech for Formalizing Artisanal Miners

There are approximately 100 million artisanal miners in the world working in over 80 countries. According to the World Bank, their production accounts for 80 percent of global sapphire, 20 percent of gold and up to 20 percent of diamond mining. Artisanal miners tend to work informally and with basic technology. Even though this results in low productivity, roughly 100 million people depend on artisanal mining compared to about 7 million people worldwide that work in industrial mining.

Artisanal mining has many problems. First, it is unsafe, leading to a high accident rate. Mercury and other toxins used for ore-processing can leak and pollute water systems. Moreover, children and pregnant women are often forced to work at informal mining sites. This type of mining feeds a black market that robs the state from millions in taxes. Finally, it furthers the activities of organized crime, as narcotic dealers use illegally mined minerals to launder money and buy weapons.

A study published by UNAM researchers explains that a large number of people in Mexico are involved in artisanal mining. Known as gambusinos, these workers form part of an economic system that includes informal buyers and even small and medium mining companies that buy ore from the artisanal miners and add it to their own production. Artisanal mining in Mexico is a variegated activity, but a factor that all gambusinos have in common is the lack of a mining concession title. It is common for these miners to work 16 hours a day in order to obtain about 20 kilograms of material, which they then grind and process with mercury. Over the course of a week, gambusinos can recover 4 to 5 grams of gold. The sale of artisanal gold is done at much lower prices than those at legal markets. Thus, at 50 percent of current prices, a group of gambusinos can obtain roughly US$280 for a 100-hour plus workweek.  

Even though state and NGO-led efforts to formalize artisanal mining are key, private companies also have an important role to play. A case in point is GoldFinX, a fintech 2.0 company. GoldFinX identifies groups of artisanal gold miners around the world and, if they fulfill a list of requirements, finances them and helps them enter the formal economy. In return, miners commit to repaying financing with a percentage of their production in gold. The mineral is stored in a vault and is used to back a one-of-a-kind cryptocurrency, called GIX. In an interview with Mexico Business News, Francois Dumont, COO of GoldFinX said: “Procuring capital for artisanal miners results in enormously beneficial consequences. It translates into tools to formalize their existence. Capital also enables them to make better choices. Thanks to the equipment they can now afford, the need for manual labor is reduced, thereby increasing safety and bolstering the rights of women and children. Their environment is gradually transformed into a much healthier and safer place.”