The cost of sending money through banks and money transfer operators is high in Africa at an astronomical rate. On average, sending an equivalent of $200 costs 9.3 percent of the value transferred. This is the highest remittance rates anywhere in the world according to the world bank’s 2019 report. In contrast, the use of cryptocurrency based fintech firms such as Bitpesa cuts the cost by 90 percent.
Exorbitant Bank Charges On Remittance
The amount sent to Africa by Africans abroad is estimated to be about $46 million to support families in their countries. Most of the money sent is used to cater for education, food, clothes among others. Meanwhile, a lump sum of the payment is being taken by the financial institutions as transfer fees.
The world bank notes that the bank is the most expensive agent for sending money back to Africa at 10.2 percent, followed by most transfer operators at 7.7 percent and post office at 5.5 percent. This is very much costly in comparison to the sustainable Development Goals target of cutting financial transfer costs to within 3% of total transaction value by 2030.
Cryptocurrency-Based Remittance In Africa
While the financial institutions have been charging Africans exorbitant price for Remittance, crypto-based remittance has become a solace for Africans, because of its low fees, efficiency and speed. One of crypto-based Remittance platforms offering solace to Africans is Bitpesa.
Bitpesa was created in 2013 by an American political science graduate Elizabeth Rossiello. The firm initially focused on facilitating bitcoin-supported cash transfers between citizens of the U.K. and Kenya. However, Bitpesa now has operations in eight African countries: the Democratic Republic of the Congo, Ghana, Kenya, Morocco, Nigeria, Senegal, Tanzania, and Uganda.
According to Stephany Zoo, head of marketing at Nairobi-based Bitpesa, he stated that the firm enables people in Africa to send or receive money from around the world at a fraction of the cost charged by traditional agents.
Zoo explained that “We process our remittance payments with a blend of traditional and personal insurance such as pooling, as well as using cryptocurrency. Our fees are 1 to 3%, so it’s significantly lower than those mentioned in the World Bank report. A lot of our clients are money transfer operators that actually move the money, and we are the underlying technology or software behind what they do as well as being their foreign exchange provider.”
Other crypto-based Remittances or related platforms offering Africans solace include Uganda’s Coinpesa which is primarily a crypto exchange and does not directly engage in the remittance business, but process trades that originated as Remittance.
Also, there is Sure Remit in Nigeria; it charges between 0-2% for non-cash remittances. The company claims to host a network of hundreds of merchants throughout the world and uses an in-house token, RMT. In southern Africa, Wala utilizes its digital coin called Dala to help users send money, buy airtime and data, pay bills and school fees in several countries at no cost.
The world bank projects the African Remittance market to grow by 4.2% in 2019 and 5.6% in 2020. Bitpesa’s Zoo is optimistic crypto-based Remittance is going to claim a share of the market.