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This article examines Bitcoin's potential to revolutionize savings in Africa, enhancing financial security amidst traditional and formal savings challenges. It highlights Bitcoin's growing adoption and its role in countering inflation and currency devaluation.
Saving has been a part of human existence for generations, passed down through various means and techniques. When we think of savings, it often involves personal interests. However, savings can also serve broader economic interests.
In Africa, traditional savings methods have evolved from informal practices to more formal means, such as bank services. While these methods can be convenient, they have sometimes faced challenges that have reduced Africa's savings rates.
According to the United Nations (2001), African countries strengthened their savings capacities in the 1970s and '80s. Unfortunately, savings in many African countries have declined in recent years. On average, savings were 23.9% and 22.5% of GDP in the 1970s and 1980s, compared to 17.5% in 1999.
This article explores the potential of Bitcoin in transforming the savings culture in Africa for both personal and economic interests. It covers:
"It doesn't matter to me if the price goes down or up, because I can still use Bitcoin as a vehicle to move money around the world instantaneously," said Mike Brock, the CEO of TBD at Block, a unit which focuses on cryptocurrency and decentralized finance.
Bitcoin began as an open-source project developed by a community of enthusiasts. It was registered on SourceForge on November 8, 2008, marking its transition to a team project. Satoshi Nakamoto mined the genesis block on January 3, 2009, embedding a notable message in this initial transaction: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”
Bitcoin has grown from being an experimental technology to becoming the legal tender of El Salvador. It is also the sole portfolio of Microstrategy, which holds more than $8 billion worth of Bitcoin. Additionally, a Bitcoin ETF has been approved, allowing traditional investors to access Bitcoin without being exposed to its risks.
In Africa, countries such as Kenya, Nigeria, South Africa, and Tanzania have seen rapid Bitcoin adoption. With a 1200% adoption rate in less than a year, Africa had $105.6 billion worth of cryptocurrency transactions by June 2021. Despite some African countries clamping down on Bitcoin, adoption rates continue to rise.
According to Andreas Antonopoulos, “Bitcoin’s rise is due to its unique value proposition as a decentralised and censorship-resistant currency.” Bitcoin's popularity is expected to grow as people become more aware of its benefits and as government and financial institutions lose credibility.
In Ethiopia, the alternative to banks and insurance companies for savings is the Iddir, a grassroots insurance program administered by a community to meet emergencies. The Esusu is a savings practice in Nigeria where a collector gathers daily contributions from market women. These informal savings methods require trust and community cooperation.
Walker (1999) refers to all schemes for transferring money from savers to consumers as ROSCA (Rotating Savings and Credit Association). A ROSCA consists of a group of people who contribute money regularly, with each member taking turns to receive the total amount collected.
The formal type of saving, derived from the West, is the bank account. This requires opening an account with documents such as an identity card, passport, recommendation letter, wage slip, and proof of address(latest in Nigeria, your social media address is now needed). The bank pays the individual an interest rate on their savings.
Each form of saving has its challenges. Informal savings lack interest rates and can suffer from indiscipline. Formal savings face issues such as currency devaluation, low interest rates, and the cumbersome process of gathering required documents.
Financial savings are crucial to secure financial growth and future security, yet many Africans face challenges in this area. Factors vary by country, but currency devaluation and inflation are major concerns.
When the future is expensive, everything is futile.
Many African countries, including Zimbabwe and Nigeria, are experiencing high inflation rates. According to a report by the United Nations, Zimbabwe has the highest food inflation rate in Africa, reaching a staggering percentage of 53.3%. In Nigeria, inflation increased from 33.20% in March to 33.69% in April of 2024. Inflation Rate in Nigeria averaged 13.50% from 1996 until 2024. Most African countries are still underdeveloped and lack advanced banking systems.
Nigeria's regulation against Bitcoin in 2021 banned its use and prohibited financial businesses from dealing with cryptocurrencies. This drove the growth of peer-to-peer (P2P) transactions to navigate banking limitations.
Harsh government regulations on Bitcoin have limited the digital currency's potential.
Bitcoin's price has surged since its creation in 2008, from less than $0.10 to $58,193.48 at the time of writing as it dropped from its all-time high of $73,700 in 2024. Despite price fluctuations, Bitcoin's value has generally increased over the years.
If you invest $100 in Bitcoin and it grows at an average annual rate of 200%, the value after 1 year would be approximately $300.
Before the creation of Bitcoin, weren't wasn't open to investing in a universal asset without any barriers. Even though the continent is blessed with gold, an average African cannot start a Gold mine. But with Bitcoin, we have with us a universal currency that we can save in that has a history of 120% annual returns on average.
Bitcoin’s decentralised nature and limited supply of 21 million make it a suitable alternative to traditional currencies and saving systems. In the face of inflation in many African countries, Bitcoin will help protect businesses and encourage savings. It offers a shield against inflation and currency devaluation, promoting transparency and financial stability.
BitPesa, a Kenya-based startup, uses Bitcoin for cross-border payments and savings. Bitcoin Kenya has implemented a Bitcoin-based savings platform. Other African countries, including Kenya, Ghana, Botswana, and South Africa, are also accepting cryptocurrencies. Adopting Bitcoin can boost African economies and improve their global standing.
Africa calls for financial innovation, and the challenges and economic constraints should enable Africans to find other motives to create a safe environment for transactions and use Bitcoin as a store of value.
Bitcoin creates an alternative to the traditional banking system. By creating media awareness and educating its citizens on the potential of this decentralised currency, providing standard regulations beneficial to individuals and businesses.
