Could Bitcoin Be The Solution For Remittances Back To Africa?
The fact that Africa is rich in human resource is not deniable given the number of Africans who travel abroad to provide their skilled labor to Western industrialized nations. However most of the African Diasporas invest heavily back home, especially in real estate market as well as giving financial support to family members back home.
It is estimated that the African Diasporas’ remittance market is currently worth $580 billion. This market is currently being facilitated mainly by two companies MoneyGram and Western Union. While their services are highly appreciated by both those living abroad and those in Africa, the fact still remains that they charge exorbitant fees for their services (as much as 12% of what the Diasporas are sending home).
On November 20, 2013, Afrikoin: an initiative set to handle challenges of remittances to Africa held a discussion on digital money in Nairobi to deliberate on the potential of using bitcoins as a way of sending money back to Africa as an alternative to MoneyGram and Western Union which are charging comparatively high fees for their services. During the discussion, it was identified that mobile money services already act as efficient inroads for money transfer, and they also saw the possibility of bitcoins being the cost effective highway for the Diaspora sending money back to Africa.
Bitcoins comes favorable due to its decentralized peer-to-peer nature, like any other cryptocurrency it doesn’t have any government regulations and neither is it subject to government bureaucracy. Hence bitcoins could just be what the best solution since the transaction fees charged are low and could benefit many people than MoneyGram or Western Union currently does. As of now, the following are the outstanding bitcoins exchange companies established in Africa:
- ICE3X: A South African main bitcoin exchange service trading in bitcoin, litecoin and Rands. People eligible to use their services must be residents of South Africa and have an account with a local bank.
- Kipochi: Operating in Kenya and has integrated its services with Mpesa. Kenya has other bitcoin companies apart from Kipochi that are currently in operation.
However there are some reservations about bitcoins, despite the obvious benefits it offers compared to the conventional channels for remittances. It has the tendency of fluctuating in value quite immensely, but experts say that this should not be much of a concern especially for people who want to transact in bitcoins and not holding bitcoin: by only using it as a means of transferring money from abroad to Africa but not as a store of value.
Perhaps the biggest concern to consider when adapting bitcoins is the big risk involved by the virtue of the fact that it is not regulated and thus prone to foul play by stakeholders, as evidenced in the collapse of Mt. Gox. Mt. Gox was the biggest bitcoin exchanger in the world, but collapsed with bitcoins worth over $470 million. It would seem that before Africa jumps to the bitcoin wagon, we might just have to change bitcoin’s philosophy and involves more safety measures like insurers, auditors and the dreadful regulators.
If Africa chooses to adapt this cryptocurrency, an oversight by a human could be what is needed to make bitcoins a viable alternative to the now expensive services of MoneyGram and Western Union.