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Kathryn Cave (Africa) - Is Bitcoin the Future of African Banking?

The crisis in the Eurozone is propelling Europe backwards. Bob Lyddon, general secretary of IBOS, an international banking association described fiscal measures in Cyprus as "a typical set of exchange control measures, more reminiscent of Latin America or Africa." Meanwhile, these much denigrated emerging regions are taking every opportunity to surge ahead.

In Africa everything is highlighted as an opportunity. Tech Hubs are bubbling up across the continent and (in many cases) a total lack of infrastructure means a whole host of the ‘Western-middle-steps' can be bypassed. Monetary innovation can be witnessed in the phenomenal success of mobile money transfer service, M-Pesa, which registered around 17 million accounts across Kenya in 2012, and is said to have transacted an incredible 31% of the country's GDP. Now throw into the mix serious problems which urgently need solutions, an incredibly young population and it becomes clear why this continent (above all) is prepared to try things that the rest of the world is scared of...

Does this make Bitcoin the ultimate solution? Bitcoin, for those who have missed the hype is the online currency that has sky-rocketed in value recently. It has no backing, circumvents all recognised banking systems and is truly decentralised - rendering it fully independent of governments and their taxes. In an article for Affrinovator, Mwbana Alliey sees this as "the opportunity for a truly Pan-Africa money revolution".

Alliey founder and managing partner of Savannah Fund, an Africa focused Technology Venture Capital fund believes that Bitcoin provides something truly exciting for Africa. In the course of the article which offers pertinent insight into the issues surrounding moving money around the continent, Alliey suggests Bitcoin is the solution to: weak African banking; the problems of transferring funds across borders; and Africans' lack of trust in existing systems.

There is currently no viable centralised banking available across the African continent. This makes the quest for one very attractive indeed. Despite the publicity around mobile system M-Pesa, this can only be used in one country at a time. As Alliey puts it "I can't use M-Pesa in Tanzania to pay an M-Pesa agent in Kenya." On top of which, in many countries including Tanzania and South Africa, services like Amazon Web Services won't even accept local credit cards.

Online payments are now thankfully getting easier due international prepaid credit cards. Although as commenter, Clinton from Zimbabwe, explained most transactions are one way, "We can only receive money via Western Union... but cannot send out a dime. The only traditional option is bank transfers (which cost an arm, a leg and any leftover parts). Mastercard prepaid cards now exist that enable us to pay for almost anything online (including Google Apps,AWS etc)."

So, what does all this mean for Bitcoin? In an exclusive article for HumanIPO, Duncan Arthur an independent payments, mobile and African banking professional who has been employed at Absa, Standard Bank Africa and Vodacom South Africa stated, "It isn't surprising that many of the most attractive brokers in terms of bitcoin rates of exchange and convenience are in Africa. Histories of weak states, failed states and states that only came about because of some colonial whim are combining with technology that recognises criminal ingenuity and a massive jump in terms of information technology into the hands of ordinary people to re-position Africa as the incubator of all things mobile and commerce."

Mbwana Alliy, is even more optimistic and concludes his article by saying, "If I had my way and was a true renegade I would create a tech development bank backed by Bitcoin, for techies, by techies with offices in every hub in the Afrilab network." What do you think? Does Bitcoin have particular potential in Africa?

 

By Kathryn Cave Editor at IDG Connect

 

IDG Connect published a two-part overview of Bitcoin in 2011, and more recently have published an article on whether the Bitcoin bubble is about to burst.

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