The cryptocurrency and the blockchain have over the years made a tremendous improvement, recording an unprecedented acceptance rate since its inception. The utilization of cryptocurrency, for instance, has gone beyond investible asset to become a tool for economic transformation. Blockchain which gives relevance to cryptocurrency has also been regarded as the solution to many gaps in the financial system, causing some institutions to explore and weigh how feasible it is to their goal. Amazingly, the two technologies have settled well in some selected developing countries, being used as an instrument for an economic breakthrough.
Cryptocurrency and Blockchain Are Bridging the Gap between the Banked and Unbanked
Financial inclusion has recently been a hot topic among policymakers and development practitioners. According to many theories and research, financial inclusion actively creates a positive path for economic transformation. The Global Findex Database even provided a clear insight into the correlation between the unbanked and development. According to the report, two-thirds of the adult population is banked while about 1.7 billion adult population remains unbanked. The report further established that almost all the adult population in the high-income countries are banked while a majority of the unbanked population comes from third world countries including Nigeria, Bangladesh, China, e.t.c.
According to the World Bank, the reason for the high unbanked population in the developing countries is not necessarily because of poverty, but the distance covered, the cost and the tedious process of paper works which makes them stick to their traditional way of financial management. Interesting enough, almost all the 2.5 billion unbanked population have access to mobile phones, and this is where Blockchain and Cryptocurrency successfully hit the ground running in such countries.
Important points to note:
- Unbanked population affects economic development.
- About 2.5 billion people are unbanked.
- Reasons for being unbanked according to world bank are due to the complex process of paper works, cost, and distance
- Almost all the unbanked have access to mobile phones.
How Cryptocurrency and Blockchain Took Advantage
World Bank Group President, Robert B. Zoellick, once stated that “Providing financial services to the 2.5 billion people who are ‘unbanked’ could boost economic growth and opportunity for the world’s poor.”
Cryptocurrency and Blockchain are gradually bridging the gap between the banked and the unbanked in the developing countries. The only cost to be part of the digital financial world is the internet. With the internet, it is easier to create a wallet, receive and send money. This convenient way of banking makes it easier for individuals to secure financial muscles to expand their businesses and pay for school fees. The blockchain has made it highly efficient and secured to bridge the disparity of the banked and unbanked to become a big boost to financial inclusion. Countries including Nigeria and South Africa are already using cryptocurrencies for their day to day transactions, and hence creating more banked population.
On 19 August 2017, the LocalBitcoin trading volume in Nigeria crossed $360 million. In the last quarter of 2017, the Citibank research ranked Kenya as one of the largest holders of cryptocurrency with $1.63 million. This figure was about 2.3 % of the GDP. Paxful, a P2P cryptocurrency marketplace which is very active in Ghana and Nigeria showed a monthly volume of $40 million in early 2018. These are strong indications that Cryptocurrency and Blockchain have become an integral part of financial system in some selected developing countries and could be a tool for an economic breakthrough in the future considering the high number of people without access to the internet in these countries.
On February 2018, the Kenyan government also announced their intention to form a task force to explore the possibility of making use of the blockchain for financial breakthrough, though the country has already developed M-Pesa which already takes 25% of the country’s transaction.
Bitcoin ATM Making Waves in Some Developing Countries
As many people find it too complicated to do transactions in various traditional banks, Bitcoin ATM is already making waves in some developing countries. There are 26 Bitcoin ATMs in Columbia, Mexico has 11, and seven are spread across Africa with South Africa alone boasting of 4. The developing countries have embraced it for its fast transaction and accuracy. It just takes some few minutes to confirm the transaction.
Also, the use of cryptocurrency to send money to family abroad is very cheap compared to the local banks. Many Africans have resorted to the digital currency for online payments and primarily relies on exchange platforms to exchange their virtual currencies to fiat.
Though the cryptocurrency and Blockchain are being implemented for economic growth in most developing countries, there is a wide range of areas these technologies can be employed and vast opportunities to be utilized.
A number of people abroad send money through cryptocurrencies, but the rate is still low. Understanding how this digital asset works in a full capacity can be a tool to reduce the high remittance fees. According to the World Bank report in 2017, remittance charge for Sub Saharan Africans is $20 per $200 on the average. In 2016, the total remittance sent to developing countries was around $441 Billion. This was almost half of the global remittance. Since there is an increasing rate of remittances sent across the borders, there will be much money saved when over 80% of the population switches to cryptocurrency which has a lower or no transaction cost.
Blockchain can Check Corruption in Developing Countries.
One of the significant problems in developing countries is corruption. There have been many incidents where transacted money was not accounted for, and funds assigned for projects vanished without a trace. The blockchain and the cryptocurrency can correctly check these by permanently recording each transaction on the public ledger free from alteration and perfect for transparency.
In conclusion, the cryptocurrency and blockchain have successfully made a meaningful impact in developing countries, as many of the citizens have resorted to the digital currency for their day to day transactions on the internet. Regardless, there are many other ways these two technologies can be implemented in the said countries to recover from economic recession in the quest to attain sustainable economic development.
By Michael Kuchar. Michael specializes in cryptocurrency day trading. He is fascinated by the blockchain technology and the wide variety of uses it has. He is also a passionate writer and supporter of the crypto revolution.