When you mention Africa in the international stage, many pictures come to mind; poverty, hunger, instability, and then the creative industry. Africa is one of those regions in the world with populations that face dismal circumstances. These countries do not possess high-quality prospects for the future, much less a level financial playing field. The countries that are wracked by poverty, corruption, inflation and an overall bleak atmosphere for any betterment.
Cryptocurrency could be applied as a solution to the many challenges that are currently facing Africa, which could also be applied to the rest of the developing nations.
Let me do a breakdown the ways by which Blockchain and Cryptocurrency can be used to solve economic problems in the continent.
Corruption is a major bane of low-income countries around the world and in Africa especially. Sudan recently took to the street in protest against her government accused of corruption amidst others. . Lack of economic democratization and corrupt government officials have created a model that has left the collective commonwealth of the citizens in the hands of a very few people. The middle-class has all but disappeared and more than 70 percent of the population live below the poverty line.
In low-income countries such as Nigeria, misappropriation of state funds by corrupt government officials is the big issue. Non-adherence to project contracting best practices results in capital projects being handled by cabals who divert state funds for their own personal interests. The use of cryptocurrencies, especially those built upon a smart contract protocol will allow for a more transparent contract system. With records on the blockchain being public, citizens will be able to monitor the way in which state funds are being utilized.
Residents in Zimbabwe and other nations plagued with an unjust financial system turn to Bitcoin as a savings option, in that although it’s notorious for its swinging prices, Bitcoin is still far less prone to inflation than inflation-stricken currencies like the Zimbabwe dollar.
There has been less trust in the Zimbabwe fiat money ever since the country underwent a gargantuan inflation rate of 500 billion percent in 2009, which has ultimately led to Zimbabwe’s crippling financial system.
In Nigeria and South Africa, traders and activists have deduced that cryptocurrency can democratize the economies by allowing for access to money for average people. Their faith in cryptocurrency’s peer-to-peer system stems from the system’s ease of evading government controls, making it more difficult for government officials to seize their money
Another area of interest in the fight against corruption by cryptocurrencies in developing countries is in the election process. One trademark of the political landscape of the less developed nations is the fact that electoral bodies are hardly ever neutral. As such, elections are fraught with discrepancies that undermine the fidelity of the process. Cryptocurrency and blockchain technology can be used to make elections in these countries to become free and fair with the citizens being able to freely exercise their franchise
Increase financial inclusion
Cryptocurrencies offer all the advantages of traditional currencies with added security and unparalleled accessibility, making them ideally suited for Africa’s unbanked population.
Use of cryptocurrency accounts enable simple payment of utilities, for example, which saves time and resources compared to physical payments as they have been carried out to date. Furthermore, adoption of digital banking enables the creation of a credit history and digital financial footprint, crucial for loan receipt, which can be used to invest in business opportunities.
Financial inclusion is a major contributing factor to one’s quality of life and when there are few financial avenues available, there is little room for improvement. The lack of financial inclusion has beset several developing countries, in which residents find themselves unbanked and unable to grow their funds. According to the World Bank, there are over 2 billion unbanked people around the world. Most unbanked individuals live in countries like Burundi, Chad, Cameroon, Niger, Pakistan and Yemen. These countries comprise populations in which under 15% of the people have bank accounts.
Even the holders of bank accounts in those nations can be left with little to no financial inclusion, as they can be underbanked. This entails that unlike people in the first world, residents in the developing world do not have access to premium banking services. With no access to certain financial instruments, third-world bank account holders are inhibited from taking part in global commerce.
Financial inclusion also comprises promising growth options for small businesses. Because of the decentralized and global prowess of cryptocurrency, local sellers can start operating imports and exports on a global scale
Reducing cost of remittance
The global remittance system is based almost entirely on the activities of citizens of developing countries who are immigrants in the developed world. From time to time, these individuals have to send money back home. In order to do so, they have to rely on intermediary services like Western Union, Money Gram, Uni Transfer etc. These platforms collect fees and charges which considerably increase the cost of such transactions. According to figures released by the World Bank in 2017, the recorded remittance to developing countries in 2016 was about $441 billion, more than half of the total recorded global remittance. The figures also revealed that global remittance fee for Sub-Saharan was an average of $20 per $200 which was the highest in the world.
With cryptocurrency, the cost of remittance can be drastically reduced as well as the hassle required to receive international money transfer. Already, there are a number of platforms in Africa and Southeast Asia that are offering such services.
Cryptocurrency can be of tremendous help to Africa, but first African policy makers need to embrace it and formulate policies that will make cryptocurrency and blockchain technology be of help to their citizens.