Could Bitcoin Transfers Be The Saviour Of Africa’s Migrant Workforce?

Written by Staff

Mar 09, 2015

By Tom Jackson | From BBC News

Over 30 million Africans live in the diaspora. They sent almost $40bn (£26.5bn) home in 2014, a figure that is likely to grow significantly in the coming years.

While north African countries such as Morocco, Algeria and Egypt receive the most, east African countries are particularly dependent on remittances.

The average per migrant is almost $1,200, representing 5% of GDP on a country-by-country average.

Yet the cost of sending this money is high.

The Overseas Development Institute (ODI) reports Africans in the diaspora pay an average of 12.3% to money transmitters to send $200 home, while the cost of sending money between African countries is also high. Each year, the ODI says total fees amount to $1.4bn.

Part of the reason for these high costs could be a lack of competition; Western Union and MoneyGram control 50% or more of the remittance market in most Sub-Saharan African countries. But help may be at hand from an unlikely source: digital currency Bitcoin.

Coining it

Bitcoin gets a negative press in the western world, especially after the collapse of the Mt.Gox exchange and the cryptocurrency’s fluctuating value.

But a number of companies are betting on Africa as the destination where it could see the biggest uptake and have the most impact.

Elizabeth Rossiello, chief executive of Bitcoin remittance service BitPesa, which allows workers overseas to send money home to Kenya and Ghana for a flat fee of 3% and says it is growing its user base by 60% month-on-month, believes the shortage of payment options in Africa make it a fertile ground in which Bitcoin can grow.

“Credit cards are only available to less than 3% of the population in sub-Saharan Africa. PayPal is blocked in many countries or much more expensive in the few it is operating. Bank transfers and remittance corridors are two to three times the price as elsewhere,” she says.

“So in terms of a need for a cheap, fast, functioning alternative form of payment, yes – Bitcoin does have a greater opportunity in sub-Saharan Africa.”