As we witness bitcoin’s continued growth around the world, one locale stands out as particularly primed for widespread adoption: Kenya. Africa today has one of the fastest growing mobile phone markets in the world with 20% annual growth and 93% of Kenyan households owning mobile phones. What makes Kenya a particularly unique case for bitcoin is that it is also a world leader in mobile payment usage.
In 2007, Safaricom, one of Kenya’s leading telecommunications companies, launched a mobile payment service called M-PESA. Today, two thirds of Kenyans use the service and more than 30% of Kenya’s GDP flows through it. The benefits to the Kenyan population are astounding as well, with M-PESA’s rural adopters often seeing dramatic income increases after adopting the program. Such incredible growth has piqued the interest of some big names in the technology sector as well.
“The Internet in Africa will be primarily a mobile one.” said Eric Schmidt, Executive Chairman of Google. Google has alluded to plans for building technical infrastructure in Kenya and other parts of Africa, including the potential use of wifi blimps or weather balloons to provide internet service. They further elaborated in a blog post earlier this year about the technology that its, “Well-suited to provide low cost connectivity to rural communities with poor telecommunications infrastructure, and for expanding coverage of wireless broadband in densely populated urban areas.” Google is also making moves in the digital payment arena. They recently introduced attaching Google Wallet payment in emails and announced an investment from Google Ventures in OpenCoin Inc.—the company behind Ripple, a new digital ledger technology with similarities to Bitcoin.
Google isn’t the only entity preparing for major moves in Africa. China has been investing in Africa substantially for the last decade and is a major shareholder in much of the African telecom industry. With the telecom industry in Africa booming and Kenya targeting 100% internet penetration by 2017, change is on the horizon.
Despite having a robust mobile payment network with M-PESA, Kenya is still subject to a slew of economic issues such as corruption, inflation, and remittance costs. Kenya faces high corruption costing more than $1 billion dollars per year (approximately 3% of GDP), with individual Kenyans paying an estimated 16 bribes per month. M-PESA has not avoided this trend, with 114 cases of fraud in 2011 alone, resulting in millions lost. A protocol like Bitcoin, which removes vulnerability to human corruption, would likely be a welcome entrant into the world of mobile payments.
M-PESA is also comes at a cost to it’s users. With Safaricom’s fees ranging from 1-10% for money transfers, users are losing value to a centralized entity with every transaction. On top of that, the Kenyan government recently began taxing M-PESA transfers, which will further increase costs by 10%.
Another substantial benefit that bitcoin has over M-PESA is with regards to inflation. Only in the last year has Kenya somewhat stemmed inflation after reaching peak rates above 30% in 2008. Though concerns linger with regards to bitcoin’s volatility compared to developed market currencies, the relative consistency of bitcoin could be a welcomed change in less stable regions.
Remittance is another core issue for Kenya. Remittance, the practice of sending money from where one is working back to their home country, is Kenya’s fourth largest source of foreign exchange, and is at an all-time high at more than $1 billion dollars in 2012. Western Union charges approximately 5-10% for next day remittance to Kenya from most of the EU and up to 20% for transfers in under an hour. If Kenyans used bitcoin for remittance the current transmission fees could instead be used for the remittance’s intended purposes – fostering education and development of the Kenyan population.
Should widescale adoption actually occur within Kenya the effects could be tremendous – not just for Kenyans, but for the bitcoin market as well. In 2011, Kenya’s GDP climbed over $33B with mobile payments comprising some $10B of that figure. Bitcoin’s current transaction volume is roughly $20M per day, or just over $7B per year. If bitcoin were to replace Kenya’s mobile transactions, BTC market liquidity would more than double. To date, Kenya’s bitcoin adoption has been muted, with approximately 1,300 downloads in a country with 41 million people, but with all the pieces set align over the next few years, it is only a matter of time before Bitcoin and Kenya find one another.