Kenya continues to play a perfect host to the venture-backed Bitcoin companies, which are expanding fast in the region to give the premier money transfer agencies such as MoneyGram, PayPal, and Western Union, a run for their money.
In February, the Bitcoin-based global remittance company BitPesa announced that it had raised $1.1 million in fresh funding, backed by hedge fund Pantera Capital. BitPesa expects to use the funding to penetrate deeper into the Kenyan markets, targeting small mobile payment services initially. The month also witnessed the entry of the Australian Bitcoin exchange, Igot, which expanded to Kenya following the acquisition of the local cryptocurrency exchange TagPesa. The region already boasts of M-Pesa, Airtel, Orange and other money wallets which are directly connected to the digital currencies.
Such a rush towards the sub-Saharan region can be attributed to the huge potential of the untapped cross-border payment market there. The World Bank projects $39 billion in international remittances to the countries south of the Sahara desert this year.
While the well-known money transmitters charge exorbitant amounts, the virtual currency facilitates extremely cheap international remittances. A report by the Overseas Development Institute (ODI) suggests that Africans, on an average, pay 12.3% to money transmitters to send $200 home, while Bitcoin-based companies, such as BitPesa, offer a 3% cut-rate fee on all transfers. Igot makes the scene even more competitive with a 1% flat transaction charge.
Another reason that Bitcoin has been accepted so well in Kenya is the lack of proper banking infrastructure. In some areas, where the banks do exist, the transfers are two to three times more expensive. Bitcoin offers the ‘unbanked’ and the financially excluded consumers a medium to participate in the global financial system.
So, even as the rest of the world frets about the falling value of the cryptocurrency, Kenyan residents are appreciating the low-cost money transfer method which has revolutionized their lives.