If you are a member of Africa’s expanding diaspora, then Bitcoin could potentially hold the key to a better life for your friends and relatives in the motherland. Many nations on the African continent are dependent on money transfers from abroad known as remittances.
In fact, it comprises a significant portion of the GDP of many African countries where 326 million people lack access to basic banking services.
Leaders of the pack
In Swahili, Kipochi means wallet or purse - a fitting name for a Bitcoin wallet that lets users receive and send Bitcoin all over the world using the M-Pesa platform. This service allows even users with low cost feature phones to take advantage of the service where your mobile number is your account number.
This is especially crucial in Africa as only 13% of the population has access to the internet. Moreover, it is expected that there will still be 5.6 non-smartphones for every smartphone by 2015.
M-Pesa is a very popular mobile payment service in Kenya for people who want to send money to each other. M-Pesa operates in Kenya, Tanzania and South Africa, as well as India and Afghanistan.
Meanwhile, BitPesa is a Kenyan start-up, which will use Bitcoin as a means of cutting transaction costs for users who send over $US 1.2 billion to Kenya annually.
“To get cash in Kenya, people either work for it or they get it sent to them,” said Elizabeth Rossiello, CEO of BitPesa. “Remittance really supports a large proportion of the population and it helps people through difficult times. Remittance is a huge market and I have always been aware of that here.”
BitPesa aims to take 1 percent market share this year by handling 6,500 transaction monthly according to Rossiello.
Move over Western Union
Today, African send an enormous amount of money back home with some estimates putting the figure at around $US 32 billion a year.
Now with services like Kipochi and BitPesa, remittances can be funneled into countries like Kenya at a much cheaper cost than via a Western Union money transfer. Migrants sending money home can expect to give an up to12% cut to companies like Western Union and Moneygram.
The Overseas Development Institute reported that Africa was losing $US 1.8 billion a year from excessive charges on money sent home by workers from abroad. Furthermore, a peer-to-peer exchange protocol could potentially reach more people in the most remote areas of Africa that do not have nearby access to banking and money wiring services. The ODI states:
"Migrants sending $200 home can expect to pay 12% in charges, which is almost double the global average. While the governments of the G8 and the G20 have pledged to reduce charges to 5%, there is no evidence of any decline in the fees incurred by Africa's diaspora. There is no justification for the high charges incurred by African migrants."
The bottom-line is that if you have a mobile phone, you can receive and send money with these Bitcoin-related services, which would make life a whole lot easier for a person that has to travel an entire day to reach a bank just to see whether the transfer has or has not arrived.
Kipochi, M-Pesa and BitCoin can together assist the developing countries in creating faster remittances and growth on GDP. Today, M-Pesa currently accounts for roughly 31% of Kenya’s GDP.
Right now, there’s no reliable system to cash out Bitcoins for government-issued currency. Unlike dollars or another popular fiat currency, you can't keep Bitcoins in your hand or upload it to your wallet to use at the local merchants. Nevertheless, Africa appears to be warming toward crypto-currencies with 16% of Africans already taking advantage of various mobile payments services.
As the availability of smartphones increases with time, crypto-currencies will too become a popular method of moving money in a more frictionless way. In the meantime, kludgy mobile services will play an important part in providing banking services and promoting the development of a crypto-remittance system.
African banks have also been getting more lax towards Bitcoin although they've stopped short of a full embrace. Today, countries like Kenya, Nigeria, Tanzania, and South Africa are leading the way in Bitcoin-related entrepreneurship. Recently, BitX South Africa launched an online digital wallet service for customers wishing to exchange fiat for Bitcoins.