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Opinion & Analysis

How Bitcoin lending can transform the lives of Kenyans

Bitcoin, the digital currency and decentralised public ledger system, has been in the news for all the right reasons recently.

Considered by many as a safe haven in the midst of Greek turmoil, the price of Bitcoin soared throughout June and July, reaching $311 (Sh31,737.55) on July 12.

Closer to home the good news for Bitcoin continued with Bitsoko, the Nairobi-based Android Bitcoin wallet being awarded $100,000 (Sh10.2 million) through the Bill and Melinda Gates Foundation.

The award comes with the opportunity to receive a further $1 million (Sh102 million) if Bitsoko’s performance lives up to expectations. Bitcoin’s good news does not end there however.

Late into March of 2015, the BitGive Foundation, a Bitcoin powered non-profit organisation, worked in conjunction with The Water Project to dig and operate the perhaps first Bitcoin-funded well, bringing clean water to a school in Kenya.

Connie Gallipi, founder of the BitGive Foundation, was there to film the proceedings with the help of BitPesa, Kenya’s biggest digital currency exchange.

BitPesa’s emergence has been greeted with a sigh of relief, as Kenyan’s now have a reliable digital alternative to the depreciating shilling, which took another hit as Fitch downgraded the nation’s credit worthiness.

As you can see Bitcoin is already making serious inroads into Africa’s philanthropic and financial landscapes, with sub-Saharan Africa standing to profit more than any other region from the advantages of Bitcoin technology.

The region is notoriously underserved by the traditional banking system, resulting in extortionate costs. These debilitating costs are perfectly explained by the World Bank, which found not only that “Africa’s overseas workers...pay more to send money home than any other migrant group,” but also that the cost of sending money to “Africa is almost 12 per cent higher than the global average.”

With Fiat currency, that is, money that a government has declared to be legal tender, and the traditional western banking system failing, acquiring the funds to start and grow a small business is becoming an increasingly impossible task for African entrepreneurs.

On a day-to-day level, Kenyan’s have found a way around the problem while becoming the poster child of alternative currencies. Spurred by the widespread adoption of mobile money, the Kenyan people are showing that “digital payments can make the world a better place.”

As you know, M-Pesa is leading the way in the adoption of mobile currencies. It has proved successful in Kenya because it has helped to bring basic financial services to the unbanked areas.

Additionally, Safaricom has helped to unlock trade relationships between unbanked people which never existed before.

For small business owners and aspiring entrepreneurs M-Pesa and mobile money do not offer a suitable solution however, as affordable working capital is unobtainable through the service. 

So how does Bitcoin fill the gap left between fiat and mobile currencies? Most importantly, the cryptocurrency offers Kenyan entrepreneurs access to affordable business loans.

Young entrepreneurs like Funtrench are already taking advantage of Bitcoin technology to fund their growing businesses through newly available global capital.

This is essential for Kenya’s economy, allowing young companies to hire staff, grow their inventory and provide essential services and innovation to the populace.

Bitcoin technology enables anyone with an Internet connection to access funding completely independently from the traditional banking system and even without a bank account.

With more than 21 million Kenyans using the Internet, and banks under-serving the region, this represents a game changing development.

At this point it is crucial to keep in mind that the cryptocurrency circumvents the extortionate transfer costs mentioned above.

This results in a cheap, rapid and global loan marketplace which allows investors from Germany, India, the Philippines or wherever else you would like to mention, to fund up-and-coming Kenyan businesses.

This would be impossible using fiat currencies as international exchange and transfer fees would far outweigh the fixed interest rates and subsequently, make foreign investments in small businesses unprofitable. 

Subsequently, entrepreneurs have access to funding from across the world and are no longer hindered by a lack of local funding opportunities.

Promisingly, companies such as Bitbond.com offer the necessary infrastructure to enable global marketplace lending.

Bitbond exists to provide a platform for small businesses and international investors to meet, invest and borrow from each other in a global online lending community.

Because there is no antiquated banking system driving up costs, p2p bitcoin lending sites, such as Bitbond, can pass on the savings to their customers, allowing for sustainable growth.

Thus, Bitbond, BitPesa and Bitsoko have created the necessary infrastructure for profitable global lending and exchanging in Kenya.

And Kenyans are responding in emphatically! BitPesa is growing at a rate of 30 per cent or more per month, while Bitbond has just reached $170,000 in total loan volume.

The Bitcoin Kenya meetup is rapidly growing, as ordinary Kenyan’s strive to find more information on a technology that has the power to be as disruptive as the Internet.

Bitsoko’s Blockchain Event Series is a further testament to the power of the blockchain, the technology behind Bitcoin, to capture hearts and minds and bring Kenyan entrepreneurs together.

As can be seen above, digital currencies are rapidly capturing the attention of Kenyan entrepreneurs, enthusiasts and laymen.

In the p2p lending space Bitcoin represents a major disruption as the minimal fees, global reach and instantaneous transfer of funds are such clear improvements on the current antiquated system.

The writer works for Bitcoin.

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