There are so many reasons why the African continent is far behind other economically viable countries in the western world. Some of the challenges bedeviling the continent today have mostly been experienced and conquered by these developed countries centuries before this time. Hence it looks absurd to imagine many African nations still wallowing in the pool of poverty, inept leadership, high-level corruption, inflation, unemployment levels, and underemployment. The effect of these anomalies is the wide range of unstable political atmosphere and poor governance, which has led many African countries into terrible economic problems.
In a way, it’s quite ironic that with unfolding events, rapid growth and achievements experienced in most parts of the westernized world, on the part of African economies, it’s almost forgivable to imagine these challenges will be unchanged even in the near future in developing countries.
Nevertheless, the arrival of cryptocurrency and blockchain technology seems to have restored hope; these digital inventions provide a possible resurgence in the developing countries.
Having said this, the task before this piece is to carefully elucidate the important ways in which Cryptocurrency can help restore the lost glory of African economies. More explanation will be given on these points; tackling corruption via cryptocurrency, reduction of remittance cost and more financial inclusiveness.
One of the leading causes of the stagnant state most Africa economies find themselves in today is no other reason than corruption. It’s so bad that corrupt public officials have encrypted a design that has made the resources owned by many to be in the possession of a selected few people in most of these African countries.
The situation is so saddening that there’s almost nothing like a middle class anymore as over 70% of the people survive below the poverty line. Developing countries are plagued with the misuse of money and resources by these corrupt public officials. Most of these officials fail to adhere to the best procedures in terms of contract allocation which usually leads to important projects being mismanaged by a few opportunists who transfer funds of the state for their selfish interests.
However, with digital currencies, especially those created based on the “Smart Contract Protocol” will enable a more open contract process. Also, based on records of blockchain quoted publicly, individuals can evaluate the way public funds are used.
Aside from tackling corruption, some other concerns of digital currencies in developing countries is the process of electing leaders. One distinctness of the political state in developing nations is that electoral bodies are not independent of being influenced by the government as their neutrality is questionable. This means elections are conducted below standards that questions the sincerity of the procedure. However, the blockchain technology and cryptocurrency are important tools which can make elections in Africa become free and fair with the citizens not only being able to exercise their franchise but also being confident that it counts.
Reduce remittance costs
The remittance used globally is based on the actions of individuals from developing countries who immigrate to developed countries. On a regular basis, these citizens need to transfer funds back to their country. To achieve this, they need to depend on financial agencies such as Money Gram, Western Union, and Uni Transfer, etc.
However, these platforms charge fees which largely skyrocket the rate of transactions. In estimation, the calculated remittance to developing countries in 2016 was pegged at $441 billion, which is more than a half of the total calculated remittance globally. Albeit, the benefit of cryptocurrency is that the price of remittance will reduce to the barest minimum and the long procedure needed to receive the transfer of international funds. As of the time of writing, there are some platforms in Southeast Asia and Africa that provide these type of services.
Take, for instance, Sure Remit, is a blockchain-powered remittance platform based in Nigeria which will provide zero charges for international transactions having launched Initial Coin Offerings (ICO) January 2018. In the Philippines, there is a remittance system known as Rebit; they provide highly efficient remittance services. The users of the Rebit system can transfer funds at a reduced rate compared to the traditional money transfer services.
More financial inclusiveness
Another vital problem being faced by developing countries is seclusion in terms of financial inclusion in countries that are low-income earners globally. It’s estimated that of the 7 billion people in the world, an excess of 2 billion falls within the unbanked people globally.
Expectedly, the bulk of this outrageous figure resides in developing countries. In countries such as Nigeria, Chad, Yemen, Burundi, Pakistan, Niger and Cameroon, the fraction of adults with bank accounts are lesser than 15 percent. Without bank accounts, this means they lack access to the full banking services. This inaccessibility to banking tools restrains them from participating in commerce globally.
However, with cryptocurrency offerings such as BitPesa and MPesa, many people in the unbanked category now have the opportunity to enjoy the services offered by banks and financial offerings via cryptocurrency.
These platforms provide digital currency bank services via mobile phone apps. Additionally, there’s the bonus offer of supporting start-ups. Local traders can afford to think based on global standards regarding importation and exportation. Financial institutions in developing countries like Nigeria are infamous for refusing to aid start-ups with loans even when rightful collateral are tendered.
Other African countries where the citizens are more financially inclusive such as South African are already experiencing record levels in the bitcoin and cryptocurrency industry. Companies like Paxful and Luno allow the population to trade Bitcoin. Luno, an online exchange for cryptocurrencies, offers its customers the currency pair BTC / Rand as well as ETH / Rand. South Africans, who prefer to diversify their portfolios, are served by platforms like Coindirect, where they can order Litecoin, Bitcoin Cash and Ripple. In addition, Coindirect also offers local market participants ERC-20 standard ICO tokens.