Why Blockchain is the Future for Remittance Payments in Africa
In this post, I’m going to explain to you EXACTLY why blockchain is the future for remittance payments in Africa.
In fact, this is why platforms like Sendlify are using blockchain to solve the problems of money remittance across Africa.
So, if you want fast, easy, cheaper, and secure ways to send money cross-border, then you’ll love this new article.
Let’s dive right in…
Introduction
Remittances are technically described as peer-to-peer transactions from migrant workers to family or friends living in their home country.
Research has found these payments are mainly used for basic expenses such as food, clothing, transportation, and education, making them vital to the livelihood of those in developing nations.
"There are millions of people who migrate each year. With the help of the family, they cross oceans, they cross deserts, they cross rivers, they cross mountains," says World Bank economist Dilip Ratha.
"They risk their lives to realize a dream, and that dream is as simple as having a decent job somewhere so they can send money home and help the family, which has helped them before."
Billions of dollars in remittances flows to Africa annually. The money could go further if it wasn't more expensive to send money to Africa than anywhere else in the world, a new World Bank study finds.
The African diaspora are making a lot of money and they are willing to share that money with the countries which they first came from," said Africa commentator Ayo Johnson, who hails from Sierra Leone but is based in the UK. "Remittances are going back to their host countries in huge, huge volumes."
Problems of Money Remittance in Africa
The formal market for money transfers in Africa is relatively young and faces the challenges typical of emerging markets.
These issues include uncertainty about the volume of remittances, limited competition, high transfer costs and a lack of technological innovation (with the notable exception of mobile banking in Ghana, Kenya, and South Africa.
The cost of diaspora remittances from Tanzania to Kenya and Uganda was among the highest in Africa in the past year, averaging between 17 percent and 21 percent per $200.
These were some of the findings of a brief prepared by the Global Knowledge Partnership on Migration and Development for the World Bank.
The report also said remittance flows to the sub-Saharan Africa region declined by 12.5 percent in 2020.
The biggest drop in over a decade -- partly as a result of the global Covid-19 pandemic, but mainly attributed to a huge decline in remittances to Nigeria.
In 2018, remittances accounted for more than $1 billion in Mali, or 6% of GDP, though the pandemic has led to a significant dip.
And that figure doesn’t take into account informal and sometimes illegal money transfers, said to be at least sometimes twice or thrice as high as the official tally figure.
Africa’s local remittance market is dominated by Western Union and MoneyGram, which together control about 20% of the market.
It is difficult to quantify the amount of money sent via Informal agents in Africa due to a lack of official records.
However, the central bank of the UEMOA (West African Economic and Monetary Union) space of eight countries says that over $450 million is moved back and forth each year through this method.
The most apparent problems of remittance payments in Africa includes:
- High transfer cost
- Lack of trust with the informal agents, which is prone to fraud
- Transactions sometimes take up to 5 - 14 days to get confirmed, and in some cases without success
- There are limits to amount you can send/receive
Blockchain as the Solution of Remittance Payments
Blockchain technology can significantly improve the way remittance payment works in Africa.
By using cryptocurrency for this transaction, blockchain platforms are able to reduce fees and transfer money more quickly.
The World Bank also noted that cutting prices by 5 percent can save $16 billion a year.
Blockchain technology is the foundation for cryptocurrencies like $Sendl. With blockchain, a tally of transactions are encrypted and stored in every participating account's ledger, in the form of blocks.
This means that a transaction cannot be altered without changing every single block, making it impervious to fraud.
The peer-to-peer network eliminates the need for a bank to keep track of the accounts. The decentralized nature of crypto is the basis for much of its growing popularity.
Using cryptocurrencies "results in a transparent open-access registry of monetary flows which makes the intermediation of banking authorities unnecessary.
Thus it challenges the conventional belief that money can only work through central planning."
In countries like Nigeria and Zimbabwe, government controls and a chronic shortage of dollars has kept these economies in financial crisis.
And political instability and ultra-high inflation has many turning to crypto as a safe alternative to securing and protecting financial assets.
Cryptocurrencies are still in the beginning stages of innovation, and companies have only just begun exploring their potential role in remittance payments.
Sendlify is optimistic this is just the beginning of a transparent, easy, safe, cheaper and fast cross border payment.
Sendlify as the Solution for Remittance Payments in Africa
Sendlify is a peer to peer cross border money transfer and crypto marketplace empowering world-wide payments with its $Sendl token.
The platform makes it easy, and swift to send and receive any form of cryptocurrency and fiat instantly.
Its mission is to to remove all complexities and difficulties associated with cross border transactions, so everyone can easily move money around.
Instead of paying up to 20-25% in fees for money transfers, with Sendlify, users don't even need to pay any fees as they can stake their $Sendl tokens and get rewards which can then be used to pay for transfer fees.
At the moment, the p2p marketplace is ready but the Sendlify Quicksend where users can send and receive money without needing to go through the p2p marketplace is still in the works, and will be ready for launch soon.
Conclusion
I really hope you enjoyed my new article on why blockchain is the future for remittance payments in Africa.
And now I’d like to hear from you.
Which Sendlify features from today’s post are you ready to try first?
Are you going to perform a cross border transfer using the Quicksend?
Or maybe you want to trade crypto using the p2p marketplace.
Either way, let me know by leaving a quick comment below.
For more information about Sendlify, here are relevant links:
