Poverty, corruption, inflation, and high unemployment levels are some of the problems that are common to developing countries around the world. Years of political instability and poor governance has plunged some nations into devastating economic crisis. With the fast-paced nature of growth and advancements in other more developed parts of the world, the prospects sometimes do seem bleak for these developing nations. However, the emergence of blockchain technology and cryptocurrency has brought renewed enthusiasm about the prospects of a revival in these countries. The focus of this article is to examine possible answers to the big question of how cryptocurrency can be of use to these countries.
The global remittance system is based almost entirely on the activities of citizens of developing countries who are immigrants in the developed world. From time to time, these individuals have to send money back home. In order to do so, they have to rely on intermediary services like Western Union, Money Gram, Uni Transfer etc. These platforms collect fees and charges which considerably increase the cost of such transactions. According to figures released by the World Bank in 2017, the recorded remittance to developing countries in 2016 was about $441 billion, more than half of the total recorded global remittance. The figures also revealed that global remittance fee for Sub-Saharan was an average of $20 per $200 which was the highest in the world.
With cryptocurrency, the cost of remittance can be drastically reduced as well as the hassle required to receive the international money transfer. Already, there are a number of platforms in Africa and Southeast Asia that are offering such services. SureRemit, a Nigerian based blockchain-powered remittance system that will offer zero-cost, cross-border transactions launched their ICO in January 2018. In the Philippines, there is a platform called Rebit which offers more efficient remittance services. Users of the Rebit platform can send money at a much lower than rate than conventional money transfer services.
2. Improve Financial Inclusion
Lack of financial inclusion is a massive problem in many low-income countries around the world. According to the World Bank, there are more than 2 billion unbanked people worldwide. The majority of this number live in developing countries around the world. In countries like Pakistan, Chad, Burundi, Niger, Yemen, and Cameroon, less than 15 percent of the adult population have bank accounts. Even the ones that do have bank accounts are said to be underbanked meaning that they don’t have access to premium banking services. This lack of access to banking instruments precludes them from being able to participate in global commerce.
With cryptocurrency services like MPesa and BitPesa, millions of unbanked people can finally get access to banking services and financial instruments through cryptocurrency. These platforms are offering cryptocurrency banking services through mobile phone apps. Telecommunications has been able to achieve a much greater market penetration than banking services. These crypto banking platforms are using the reach of telecoms to take financial emancipation to the doorsteps of the unbanked and underbanked. The end result is greater financial inclusion.
There is also the added incentive of empowering small and medium-scale businesses. Local merchants can begin to think global in terms of imports and exports. Banks in developing countries like Nigeria are notorious for their unwillingness to give loans to small-scale businesses even when suitable collaterals are provided. With cryptocurrency, platforms like Mpesa, BitPesa, and Nebeus can offer crypto-backed loans to small-scale and medium-scale merchants. This will go a long way in getting them started in the import and export business which is a fundamental part of national commerce.
Another aspect of financial inclusion that many places in Africa and the rest of the developing world lack is access to international payment systems. Global commerce is largely denominated in the US Dollar and it requires specialized systems for payments and receipts. This is often a challenge for many merchants in developing countries as they have no access to foreign exchange as well as the means to pay and receive money in foreign currency. BitPesa is leading the charge in providing solutions to these problems, especially in Sub-Saharan Africa. In Indonesia, there is a service called TenX that provides a digital wallet which allows users to receive Visa card payments.
3. Fight Against Corruption
Corruption is one of the major banes of low-income countries around the world. Lack of economic democratization and corrupt government officials have evinced a design that has left the collective commonwealth of these countries in the hands of a few people. The middle-class has all but disappeared and more than 70 percent of the population live below the poverty line.
In developing nations, misappropriation of state funds by corrupt government officials is a big problem. Nonadherence to project contracting best practices results in capital projects being handled by cabals who divert state funds for their own personal interests. The use of cryptocurrencies, especially those built upon smart contract protocol will allow for a more transparent contract system. With records on the blockchain being public, citizens will be able to monitor the way in which state funds are being utilized.
Another area of interest in the fight against corruption by cryptocurrencies in developing countries is in the election process. One trademark of the political landscape of the less developed nations is the fact that electoral bodies are largely partisan and hardly ever neutral. As such, elections are fraught with discrepancies that undermine the fidelity of the process. Cryptocurrency and blockchain technology can be used to make elections in these countries to become free and fair to the citizens being able to freely exercise their franchise.
These are just some of the ways in which cryptocurrencies could be of benefit to developing nations around the world. Cryptocurrency and blockchain technology continues to be at the heart of public consciousness all over the globe. It will surely be interesting to see to what extent developing countries apply cryptocurrency solutions to their problems.