Vol 14: How Blockchain Can Transform Africa's Financial Sector.
This is the 2nd post in a blog series on Blockchain Transforming Africa, so for today, I will be explaining how this technology can transform our FINANCIAL SECTOR.
Africa is the second-most-populated continent in the world, with around 1.3 billion people. However, before independence, African countries have struggled with infrastructure problems due to historical issues with colonialism, civil wars, humanitarian crisis and rugged terrains, this has made financial services less accessible not on till the late 1990s when we started seeing the fast development of commercial banks.
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According to an article published by Microsoft in 2019, around 66% of the population remain unbanked, these and more are some of the issues Blockchain is trying to solve, cryptocurrencies could therefore be a good alternative to traditional banking in Africa. They only require a smartphone to access them and they provide businesses and individuals with enhanced transparency and trust among their users across Africa. Cryptocurrencies are now perceived as a groundbreaking innovation that we now use to bypass the several systemic financial flaws affecting our continent.
However, it is true to say that the financial sector is going to have the most use-cases of Blockchain due to its high dependency on intermediaries. In this sector, for instance, cryptocurrencies are now considered as a substitute for current, inflation-sensitive fiat currencies since they are not subject to the government. Blockchain has also proven to secure identity and create an innovative approach to insurance and greater control over individual data.
Full ownership of personal assets without third parties is extremely empowering for users and allows free and open trade between asset holders, blockchain allows this in a way that has already changed the way we look at conducting transactions by providing a ‘trustless’ environment, which creates greater transparency and security.
When we talk about trust in any given trade transaction clients and third parties engage in a complex flurry of financial assurances and legal paperwork to show both sides that the other will make good on the deal. This paper-based system delays both the movement of goods and the payment cycle for such transactions, Blockchain technology can streamline ways that organizations can track and verify the authenticity of such documentation, reducing transaction time and cost, it is also fundamentally secure and creates an immutable ledger that can be used to securely transfer funds between parties.
In governance, Blockchain will help protect our data, streamline processes, reduce waste and corruption while simultaneously increasing trust and accountability. The Distributed Ledger Technology on Blockchain will help solve the issue of transparency in government whereby, public sectors like financial institutions, land registration, identity management, elections, supply chain traceability, health care, taxation etc. can prove the integrity of their data or the ordering of events to the citizens, it’s very easy on blockchain and if anybody should manipulate it, there is a trail of that already on the blockchain.
While some of the challenges may seem daunting, the opportunity for Africa is truly great. This is because blockchain is new and it is also an emerging technology where barriers to entry and adoption are much much easier than in previous technological revolutions in industry and commerce.
Startups and entrepreneurs are already capturing the market first. Here are a few examples of startups using Blockchain technology to address Financial problems in Africa;
AgriLedger: a blockchain-based Kenyan startup that allows farmers to know their buyers and what the market prices are.
BitcoinAfrica.io: a young, leading news platform about blockchain and cryptocurrencies.
BitPesa: is an online payment platform that allows transactions in Bitcoin and is now largely used as a B2B service.
As blockchain technology emerges and grows, more opportunities will become obvious and we are currently seeing the increase in advancing socio-economic growth through the adoption of cryptocurrency transactions and blockchain technologies for e-commerce. The African continent is progressively embracing mobile cash and virtual currency technologies as we see with the recent launch of a digital currency by the Nigerian government.
As mobile technology has proven to help African economies leapfrog and enter the digital era with cutting edge technologies, Blockchain has consistently prove to be a secure peer-to-peer system to record transactions that have become the electronic “ledger” of choice thanks to its transparent, decentralized, and nearly fraud-proof structure.
Yet, a successful transition will only be possible if several stakeholders - from governments to ecosystem builders - will agree on a common cause and devise appropriate strategies.
Until next week, Happy Learning.
Enjoy the weekend.