Cryptocurrencies on the Blockchain: Recent Developments in Africa

africa cryptocurrencies blockchain

Written by Akachi Obijiaku.

Recently, there has been a rise in discussions concerning blockchain technology and cryptocurrencies. While some have been speculative, blockchain does indeed hold the potential to facilitate innovation and connect people in developing countries who, traditionally, have had limited access to financial services.

In simplest terms, a blockchain is a distributed ledger. Its decentralized nature implies that it does not need to be managed by a central authority. This reduces transaction costs, as the need for an intermediary is eliminated, and people can engage in transparent transactions.

Africa’s Blockchain: Potential Use Cases

The instability of central authorities in various African countries is a serious problem that blockchain frameworks can tackle. Nasdaq, for example, believes Bitcoin is immune to local inflation, which arises due to recurring political conflict, war, or, simply, mismanagement.

Another notable benefit of cryptocurrencies lies in its security. With a cryptographic-oriented protocol, information on the blockchain is highly unlikely to be alterable, as records cannot be retracted. For example, in African countries, SMEs and service providers can enter into agreements with one another on the blockchain without red tape and fear of fraud. A ‘smart contract’ can significantly reduce (or even do away with) settlement times and automatically make payments to either parties when all conditions of the business agreement have been made. Such self-executing financial contracts on the blockchain also imply that counterparty risk is reduced and, thus, they present a novel way of combating fraud and corruption (which are prominent in many developing countries such as Botswana, South Africa and Nigeria). In Africa alone, economic crime has risen by 70% since 2015.

Using cryptocurrencies (such as Bitcoin), people in emerging markets are able to move assets transnationally and escape the relatively heavy costs associated with such transfers. An interoperable system currency such as Bitcoin can make cross-border trade significantly easier. A potentially fruitful use case for this would be in Zimbabwe, where the national currency has collapsed and has engendered the use of US dollars and Chinese yuan locally; it presents an ideal test for Bitcoin as a back-end trading currency. In fact, Zimbabwean bitcoin startup, BitFinance, has just announced plans to test that idea.

However, Africa is home to only 1.4% of blockchain companies globally. There needs to be much more traction in order for such African startups to start making significant social impact. Bankymoon is an example of a company that is exploring the applications of blockchain in frontier markets. Operating out of South Africa, it aims to provide Bitcoin payment gateways to vendors of smart meters and cut out costly local authorities.

Potential Challenges

From peer-to-peer micropayments to cross-border transactions, blockchain holds hope for a future where there are reduced financial inefficiencies and more inclusive growth. If African nations can support the development of this technology — for example, through building and promoting technology hubs — they will become beneficiaries of transactional security. Nonetheless, it is essential that governments willing to experiment with this nascent financial instrument focus on the practicalities of it, rather than the hype. The functioning of blockchain applications, for example, is energy-intensive. This means that societies with poor power supply are likely to get left behind.

Hence, to really make blockchain inclusive, governments in emerging economies will need to lay a strong structural foundation and work in close partnership with entrepreneurs. Proper institutional buy-in would be needed for Bitcoin to be operational in developing societies, and a good first step would be to clarify its legalities and the extent to which it can be treated as legal tender in various jurisdictions.

Image: ‘Bitcoin‘ by fdecomite

Entrepreneurship Education in Africa

Written by Akachi Obijiaku. 

Despite Africa’s reputation as the world’s next economic frontier, the continent’s expansion has created insufficient jobs and the high unemployment rates pose threats for the next generation. This points to a greater need for entrepreneurship education in Africa.

University of Oxford’s Skoll Centre for Social Entrepreneurship predicts that over 600 million jobs need to be created by 2020 just to keep employment levels the same in the developing world; in sub-Saharan Africa alone, long-term unemployment among youth is estimated to be 48%.

To foster an entrepreneurial culture, effective entrepreneurial education among youth is much needed. Indeed, several studies have shown that specialized education directed toward entrepreneurship is a strong motivator that can engender a startup mentality among students. Such education can equip African youth with the knowledge needed to be self-reliant and manage SMEs, creating jobs and boosting economic growth in the process.

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Alternative Finance in Africa Report Released

alternative finance in africa

crowdfunding newsWe’re excited to announce the inaugural Developing World Alternative Finance report! The first edition focuses on the state of alternative finance in Africa.

The report is based on data from the AlliedCrowds Capital Finder, a database of over 6,500 alternative capital providers across the world. These include angel investing networks, VCs, private equity firms, impact funds, crowdfunding platforms, DFIs, accelerators, and more. The providers are categorized by sector type (agriculture, healthcare, etc.), as well as the type of capital they provide (equity, loan, grant/donation).

This report focuses on Africa, which is an emerging continent for alternative finance. It highlights western Africa as an emerging region, and shows unique data on the continent’s alternative finance ecosystem.

Data in the report

The data in the report includes:

  • Ranking of African countries by strength of alternative finance
  • Top sectors in Africa
  • Breakdown of provider types
  • and much more!

Click here to view the report!

Crowdfunding Solar Energy in Africa

solar energy crowdfunding

Written by Akachi Obijiaku

Access to electricity in Africa is poor; over 45% of sub-Saharan Africans (almost a billion people) are without energy access. Current deployment rates suggest that it will be 2080 before every African has adequate access. Further compounding the problem is that over 60% of the energy supply in Africa is from fossil fuels, while just about 1% is made up of wind, solar and geothermal sources. Innovative government-supported (but not necessarily government-run) financing options and entrepreneurial initiatives might prove to be beneficial in sparking change.

To avoid the deleterious effects of carbon-intensive economic growth, there will need to be an energy revolution in the region, one which is smart and dependent on client-resilient infrastructure and the plentiful renewable energy sources. A diversification of energy sources seems crucial at this point, and off-grid solar solutions are becoming increasingly relevant. Some leaders, like Oxfam’s executive director Winnie Byanyima, are going a step further and calling for African economies to be explicitly designed to achieve the wellbeing of the people as well as the environment. Such climate-smart measures will increase access to energy, provide jobs, and reduce environmental pollution.   Continue reading →

Private Funding for Development: Insights from the Capital Finder

Developing World Entreprenuer

Private funding for development is becoming increasingly important, as organizations look to find capital to finance their programs amid a climate of high political uncertainty.

In this shifting environment, AlliedCrowds has created the Capital Finder, a solution that can be hugely beneficial in unlocking private funding for development organizations, firms, and individuals.

Over the last several months, we have been working hard to improve the data behind the Capital Finder, and we’re excited to tell you a bit more about the tool, and show you how it can be used. Continue reading →