During the 70s and the 80s, the African banking sector suffered a major liquidity and insolvency crisis. The finance practices were undoubtedly poor, and so do the supervision of counterpart risk. Though with time, the sector thoroughly improved with the introduction of more robust and resilient technologies.
But even with vast improvements in Africa’s national and local banking infrastructure, a majority of its people still found themselves deprived of using such services. As noted in an elaborative report by CNN, 75% of the sub-Saharan population still don’t have a bank account. In the same report, CNN presented Bitcoin as an anticipative alternative.
And as CCN, and many believe, Bitcoin — the world’s first and the foremost decentralized digital currency — seems to be a perfect fit inside a ‘mostly-elusive’ African banking sector.
The Need v/s The Greed
According to a report by Overseas Development Institute, Africa pays the world’s highest transfer fees (around $1.8 billion annually) despite being the poorest region. In the wake of their findings, the global community decided to cut 5% from their remittance charges (earlier it was 12%). But the decision is still waiting to be reflected on the lives of common people.
Even with the cutback, if an average person wants to send $100 to his family back in Africa, the total amount received would be $93. While if the same transaction is implemented using Bitcoin, the received amount would at least be $97.
Michael Kimani, Head of the African Digital Currency Association, a Kenya-based organization to promote the use of Bitcoin, also supports the idea of a simplified and accessible banking sector for African people. “Bitcoin can greatly alter the remittances industry and beyond,” he expresses to CNN. ”From seven days [for a transaction to clear] using banks & PayPal, down to 20 minutes speaks volumes.”
New Bitcoin Startups Emerging on African Soil
The question is not to replace the banking sector, but at least provide enough competition to force them out of monopoly. Emerging Bitcoin businesses in Africa literally thrive on bringing such a professional rivalry to local the remittance market, only to benefit the end-users.
Kenya seems to be receiving a much larger portion in this emerging banking scenario. The country, whose 43% of GDP reportedly flows through the mobile payment service M-Pesa, is also hosting a couple of Bitcoin-specific ventures (such as BitPesa) to boost the remittance sector.
Next in the list is South Africa, which is also scheduled to host a Bitcoin conference in April. The country is already a home to Xoin — a Bitcoin-based startup through which over 30,000 local stores accept cryptocurrencies. A similar sort of service is also emerging in Ghana.
Challenges
There is always an another side of a “coin”. Bitcoin, despite its larger-than-life technological features, still goes through a series of issues like security and volatility. On the other hand, centralized remittance services such as MoneyGram and Western Union have truly taken over the African market, with availability in over 25,000 and 32,000 locations, respectively. The focus then automatically shifts to improving the core-technology on which Bitcoin is based — blockchain. Companies like Ripple are constantly working on simplifying, and cheap-e-fying, cross border transactions using the same Bitcoin technology.
The digital currency sector is still an infant. We leave it to time to decide how it manages to catch up with the existing banking practices to deliver people a robust, cheap, resilient and transparent way to transfer money.