By Thy-Diep Ta and Lindsay Van Landeghem
Blockchain, a transparent, tamper-proof ledger that tracks and stores bitcoin transactions internationally, is positioned to unlock African markets by increasing payment transparency and reducing transaction costs. This phenomenon is particularly powerful in a geography wherein corruption, mismanagement, and poor infrastructure impede international trade and effective resource management, contributing to the continued impoverishment of the African continent. (2) The effective uptake of blockchain could allow Africa to ‘leapfrog’ the technological innovations of developed economies, promoting African development by accelerating infrastructure development, catalyzing small- and medium-sized enterprise growth, and reducing the costs associated with financial transactions for end-users.
Trillions of dollars of infrastructure investment could be unlocked in Africa as blockchain technology could combat corruption and facilitate legal property ownership. (1) Blockchain technology could allow groups and individuals to survey land and to record title deeds, providing a permanent, immutable public record that could be utilized to solve land disputes. This innovation is particularly significant in a continent plagued by corruption and nepotism, and in which land disputes can be a significant driver of conflict. This circumstance would also encourage property development, infrastructure investment, and institutional lending, as registered land could be used as collateral for loan access and corruption impeding investment could be alleviated. In essence, blockchain developments could promote greater legal accountability and efficiency, facilitating greater investment on the African continent.
In addition, blockchain technology could contribute to the growth of small- and medium-sized enterprises in Africa. Blockchain reduces information barriers, allowing governments and companies to learn from and leverage best practices across geographies, thus stimulating innovation and increasing trust in new technologies. Growth in the fintech space could also encourage the development of technological hubs and could give a greater number of people access to the formal economy. In addition, blockchain technology could reduce the cost of regulation and compliance, making trade less costly and government more efficient and effective. (5) Finally, blockchain could help companies achieve operational efficiencies allowing them to expand their operations and charge lower prices, expanding access to life enhancing goods within base of the pyramid communities. Blockchain could thus serve as a significant catalyst to Africa based businesses, and thus to local economies.
Finally, bitcoin, a form of currency underpinned by blockchain technology, could reduce the high cost of international money transfers and could increase capital access on a continent on which two thirds of people are ‘unbanked.’ (3) Innovations ranging from smart grids facilitating energy distribution to credit scoring supporting loan access are experiencing significant uptake and attracting investment, which attests to the attractiveness of the fintech industry in Africa. Additionally, mobile money services have already lifted 194,000 Kenyans out of poverty, demonstrating the efficacy of technology-supported payment infrastructure on the continent. (5) Blockchain could thus reduce the costs of financial transactions and contribute to the continued growth of the fintech industry in Africa, which has demonstrated an ability to improve the base of the pyramid livelihoods in Africa. (2)
Blockchain thus poses significant opportunity that could catalyze Africa development by accelerating infrastructure development, small- and medium-sized enterprise growth, and end-user access to financial services. However, the uptake of blockchain technology in Africa also faces a number of potential barriers. In many parts of Africa, for example, the electricity and internet infrastructure upon which blockchain relies is erratic, which means that technologists would likely need to adapt blockchain innovations to overcome structural barriers in the African context. Additionally, fintech startups will face challenges associated with navigating complex regulation and political power games across African countries. Fintech startups will also need to raise significant capital to support the high costs associated with hiring and retaining specialists and developing bank-grade security infrastructure. (4) Thus, though blockchain poses multifarious opportunities facilitating African development, implicated challenges will first require significant business model and technological innovation. (Word Count | 628)
References:
- https://www.forbes.com/sites/rogeraitken/2016/04/05/bitlands-african-blockchain-initiative-putting-land-on-the-ledger/#1604fdd57537
- https://betterworkingworld.ey.com/disruption/blockchain-africa-challenges
- https://www.theguardian.com/world/2016/aug/11/democracy-forests-finance-tech-africa-better-place-digital
- https://qz.com/618674/africas-big-banks-are-betting-on-fintech-startups-and-bitcoin-to-beat-disruption/
- https://hbr.org/2017/05/how-blockchain-could-help-emerging-markets-leap-ahead
Looking at all these articles, quite puzzled to see all the different applications of blockchain and what it could mean for the future. Interesting contrast to think how such a high-tech innovation could impact one of the lowest-tech regions with lack of fundamental supplies..
Blockchain certainly have great potential in Africa, but given the current political and economic environment in Africa, and the huge capital investment needed to setup the blockchain system for any industry in anywhere in the world, it maybe extra difficult for Blockchain to actually make a difference in Africa.
Completely agree that blockchain could really solve some of the most pervasive problems of corruption and lack of transparency in doing business. However, I feel that automation and electronic records might be the intermediary necessary step before Africa can really leapfrog. Many of the business, legal, and administrative processes in the emerging markets are loosely defined to start with. Therefore, the move to blockchain must be preceded by a concerted effort to digitize services provided to customers. One great example of this is A2i in Bangladesh – which has made modest but steady progress.