Blockchain promises to enhance transparency and reduce financial inefficiencies and costs within various sectors of African economies. Blockchain can drive a new digital era of more inclusive growth from enabling frictionless cross-border transactions, micropayments solutions to smart contracts securing land or property ownership.
Expensive cross-border transactions
Africa has 54 countries using different currencies, legal systems and exchange rates. As a result of this, it is easier to make a transaction between an African country and Europe than between two African countries. Blockchain has the ability to significantly improve the financial services in Africa and eliminate inefficiencies and high transaction costs. It has the potential to add value to the poorest people who are at the moment being charged the highest fees. African countries are the early adopters of the blockchain technology owing to its potential to solve the problem of high cross-border transaction costs. Tunisia and Senegal are the first countries that have put their national currencies on the blockchain.
Financial inclusion for unbanked individuals
Only one third of adults in sub-saharan Africa has access to some kind of financial services. Bank branches are only available in urban areas and charge high fees. Both these facts make it very difficult to transfer money among individuals. Financial inclusion can promote strong and stable economic growth in African countries: access to financial services would allow families to invest in their future through education and health. Financial technology such as blockchain can provide financial services to all levels of society and bring affordable financial services to low income countries. For example, blockchain micropayments can enable pay-as-you go solar systems and provide low income families with access to clean energy through affordable monthly digital money installments. To this end, the World Bank Group together with blockchain front runners Coinify, M-PAYG and Chainalysis held an event to discuss the option for leveraging blockchain innovations on energy access. Blockchain can tackle the problem of unbanked individuals down and make the financial services available to everyone with a mobile phone at a minimum cost.
Tenure and property rights
Records of who owns a certain piece of land or property are generally maintained by the government. However, the actual owner of the land or property might not have a piece of paper to prove it. Governments can lose the record, manipulate it, or issue a deed for someone else for the same piece of land. This can result in situations in which two people claim the ownership for the same land or property. Blockchain could solve this problem, since it can serve as a tool to determine who owns what. In this way, the information can be securely stored on the ledger and prove which parties are involved and what they agreed on. Being documented on decentralised network, this information cannot be forged and any transfers of the property ownership maintain transparency in the network.
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