With the high mobile phone penetration already in place, Africa is set to enable more users to download a Bitcoin wallet on their devices.
In an email last year, Werner van Rooyen from Bitx, one of Africa’s biggest Bitcoin exchange firms, wrote that Africa has been waiting for something like Bitcoin for a long time.
Why? He said the continent of over a billion people has been underserved by financial institutions for such a long time.
Factors for Bitcoin use growth in Africa
Some of the factors he cited in this regard are the high cost of financial infrastructure, high fees compared to the average earnings, high cost of having a physical presence like ATMs, bank branches and remittance offices.
To cap it all, he noted that there's been a lot of talk in finance of "the next billion" and a big part of this next billion will come out of Africa.
Today, Africa has continued to wake up to some of the reality of using the digital currency particularly with the high mobile phone penetration already in place to enable more users in Africa to download a Bitcoin wallet on their devices.
Three other components which have also assisted Bitcoin use in Africa: growing number of exchange companies like BitX which have been working to engage with the public and government regulators to increase adaption; increase in developers to build more innovative products and uses for Bitcoin (like integration with physical and online stores); and getting more people to start using it as a means of transacting.
Bitcoin use cases in Africa
But in which ways has Bitcoin use manifested across the continent to be a sought-after currency among the people? Here are four of them:
Top of the list of what Bitcoin is primarily used for in Africa is for remittance purposes.
Though the African remittances which flow to and within the continent are officially pegged at $40 billion per year by the International Fund for Agriculture Development (IFAD), industry insiders say this figure amounts to just a third or fourth of the actual amount transacted as most transfers are conducted via informal means.
Coupled with high remittance charges – the World Bank says Sub-Saharan Africa remains the highest cost region with an average cost of 9.5 percent - these have created inconveniences which discourage the movement of funds through known official means such as financial institutions.
This is due partly to the blockades created by the lack of adequate facilities in parts of Africa to enhance the transfer and exchange of funds across borders without any form of restriction on such transactions.
It also helps solve import and export payment challenges and overcome currency liquidity constraints in Nigeria.
Now, Africans are reaching out to Bitcoin, particularly for its low value payments since there isn't a fixed minimum fee which gets charged to send money for a transaction either to the person sitting next to them, to a business or to a peer-to-peer on the other side of the world.
Due to its anonymous nature the next main use of Bitcoin in Africa is to source funds to support humanitarian efforts .
To help ensure that safe and reliable water is provided across Kenya, for example, The Water Project launched a new initiative which last year sought Bitcoin donations to fund new sensor-enabled water projects in the country. An appeal was launched for Bitcoin donations to Botswana's SOS Children's Villages in 2014.
Globally, the charity sector has been touted to be one of the biggest beneficiaries of the financial services sector’s investigation into the new technology.
With the experimental phases being conducted by international organizations such as Unicef with its unicoin donations, and African crowdfunding platforms such as Bankymoon and Usuzi which accept Bitcoin, the appeal now is for global support for a cause based on its potential convenience to a wider audience.
South African startup, The Sun Exchange, for example, seeks to scale up its marketplace which crowdfunds small-scale solar projects using digital currencies such as Bitcoin.
As with remittances, it appears that these two uses will remain at the top of Bitcoin use in Africa. The freedom, openness and ease of use which Bitcoin provides are yet unrivaled and are not likely to go away soon.
As such, it shows that Bitcoin use is gaining acceptance and venturing into new aspects of life across a mobile phone-led African context.
3. Tech startups adaptation
In the tech sector in Kenya, coupled with East Africa's powerhouse economy and a developed ICT hub for the region, the digital currency BitPesa startup has cashed in on the growing success of the mobile money sector in the country.
M-pesa recorded a huge success which has stretched beyond Africa, thus highlighting an opportunity which made Bitpesa become the first Bitcoin startup based in Africa to receive VC funding. Other Bitcoin enthusiasts are also pushing for its adoption and trying to create more awareness of the need to adopt policies around digital currencies.
Then along comes Bitsoko with its Android mobile wallet. What this shows is that the exponential growth in startups across Africa has been fuelling the integration of Bitcoin as a form of payment by online markets to avoid damaging financial security issues.
This integration eases e-commerce platforms’ burden of having to store sensitive financial data on their local servers and reduces the risk of a data breach which could leak personal user information and breed mistrust.
4. Improved financial education
Learning to buy and sell Bitcoin in parts of Africa is no longer new today.
More people are coming to realize the potential of making money and the liberty to learn about money issues at their own pace by trading in Bitcoin.
Platforms such as localbitcoins.com, altcointrader.co.za, bitpesa trade etc are offering traders – including from Africa – the opportunity to trade in Bitcoin using their local currencies.
ICE3X launched Bitcoin trading in Nigeria, the largest recipient of remittances in 2015 Nigeria ($21 billion) according to the World Bank.
Premise is a San Francisco-based data and analytics company which track macroeconomic trends in real-time for organizations such as the World Bank and the United Nations who use BitPesa to send frequent bulk mobile payments to Tanzanian contributors’ mobile wallets.
Bitcoin has triggered many people’s interest to gain more financial insight and improve their understanding of the money market as well as the creation of Bitcoin Academy.