There are presently regions in the world with populations that face dismal circumstances. These societies do not possess high-quality prospects for the future, much less a level financial playing field. They include third-world countries and those wracked by poverty, corruption, inflation and an overall bleak atmosphere for any betterment.
Cryptocurrency and blockchain technology have the power to change these afflictions, with solutions for a variety of issues unique to developing countries.
An Unlikely Aid To The Developing World
Although the advent of cryptocurrency was very much directed towards first world countries, it carries promising features for the third world as well. This includes all the regions of the third world: the developing countries in Asia, Africa and Latin America. The following delineates the ways in which cryptocurrency can help the developing world, with regard to specific parts of these regions.
Reducing Remittance Costs
The global remittance marketplace is predominantly composed of immigrants in the developed world, many of whom are from developing nations. These citizens send remittances back to their home countries, or the countries in which their family members still reside. Sending a remittance requires intermediary services such as Western Union, Money Gram, Transferwise, etc. These remittance companies charge fees to the senders, which appreciably raise the cost of the senders’ transactions.
According to the data released by the World Bank in 2017, the global remittance fee for Sub-Saharan Africa averaged at $20 per $200, the highest in the world and in a poverty-stricken region no less. Additionally, the recorded remittance sent to developing countries in 2016 was roughly $441 Billion, constituting more than half of the total recorded global remittance.
Cryptocurrency offers a recourse to the pricey remittance-related charges, as the use of it slashes the cost of a remittance. It also removes the trouble that often goes along with receiving the sent money. This is especially important to those who live in impoverished conditions and rely on these international money transfers. There are various platforms in Africa and Southeast Asia that offer crypto-based remittance services.
For example, there is SureRemit, a Nigerian-based, blockchain-powered remittance service that offers zero-cost, cross-border transactions. It launched its ICO in January 2018.
There is also MPesa, a ten-year-old, leading mobile phone-based money transfer and financing platform, which has thrust Africa into the crypto realm. It serves over 30 million customers across Kenya and nine other countries in Africa, South Asia, and Eastern Europe. MPesa has not only opened up a cheaper, more efficient remittance service for Africa’s poor and small business owners, but it has paved the way for financial innovation in the continent, leading to similar services like Bitpesa.
The Philippines has the Rebit platform, which allows users from anywhere in the world send crypto funds (currently accepting Bitcoin) to the Philippines for free.
Prevailing Over Inflation
Inflation is a devastating reality for millions of people in developing nations. In 2018, the countries hit the hardest by inflation, based on those with the most exorbitant inflation rates are: South Sudan, the Congo, Argentina, Libya, Angola and several others. However, none of these countries can compare with the level of inflation in Venezuela, the only country with an inflation rate in the millions, at a heaping 4,000,000%. Even South Sudan, the country with the second-highest inflation rate, pales in comparison, with the inflation rate of 117.7%.
Cryptocurrency can help those who live in areas of high inflation prevail over it, or at least bring it under control. For example, in countries like Venezuela, though not limited to it, inflation occurs when money becomes almost entirely worthless, wrought by corrupt and inept governments, regimes governing bodies.
Cryptocurrency presents an alternative to the nearly useless money in countries with such governments and their resulting high inflation. Bitcoin and altcoins grant the crypto holders of these nations a respite from poverty, no matter how temporary, since major coins are worth more than the USD, let alone the worth of the inflated currencies. Those who wish to earn crypto in developing nations usually do so through mining.
In Venezuela for example, thousands of people have broken out of overinflation by mining Bitcoin. Given that the country offers cheap electricity, mining is accessible to many Venezuelans. Bitcoin Mining has become a more financially auspicious labor than working for the country’s native currency, the Bolivar, which is worth $0.016.
Mining Bitcoin can earn roughly $500 a month for participants, a fortune for Venezuelans. This amount enables a family of four to purchase food, household goods and basic staples a reality. Expectedly, it is not just the common folk of Venezuela who mine Bitcoin, as this crypto activity has been reportedly found among the country’s college professors, police force and even its politicians.
A few economists have contended that cryptocurrency is the only force keeping Venezuela’s economy afloat.
Fighting Against Corrupt Financial Systems
Dovetailing to the issue of inflation is unsurprisingly corruption which, as aforesaid, is often the cause of it. The inhabitants of developing nations are usually subject to corrupt governments, which result in their poverty and lack of agency for improvement.
A corrupt or incompetent governance almost always leads to a corrupt financial system, in which very few benefit. The African country of Zimbabwe is rife with corruption in many of its public sectors. Although the country has The Prevention of Corruption Act instituted, many forms of corruption still prevail, as the government typically only takes action against corrupt activities (bribes, gifts, facilitation payments) when they are carried out by political opponents.
Cryptocurrency is beneficial to Zimbabwe and all the developing nations with similar corrupt financial systems. It helps reduce the ensuing poverty and hyperinflation of such corrupt systems. This is due to crypto having become a savings account option for many people in the developing world. 37% of users of Zimbabwe’s BitFinance use Bitcoin as a savings account. BitFinance is an ICO distributor, exchange and crypto banking provider.
Residents in Zimbabwe and other nations plagued with an unjust financial system turn to Bitcoin as a savings option, in that although it’s notorious for its swinging prices, Bitcoin is still far less prone to inflation than inflation-stricken currencies like the Zimbabwe dollar.
There has been less trust in the Zimbabwe fiat money ever since the country underwent a gargantuan inflation rate of 500 billion percent in 2009, which has ultimately led to Zimbabwe’s crippling financial system.
In Nigeria and South Africa, traders and activists have deduced that cryptocurrency can democratize the economies by allowing for access to money for average people. Their faith in cryptocurrency’s peer-to-peer system stems from the system’s ease of evading government controls, making it more difficult for government officials to seize their money.
Bringing About More Financial Inclusion
Financial inclusion is a major contributing factor to one’s quality of life and when there are few financial avenues available, there is little room for improvement. The lack of financial inclusion has beset several developing countries, in which residents find themselves unbanked and unable to grow their funds. According to the World Bank, there are over 2 billion unbanked people around the world. Most unbanked individuals live in countries like Burundi, Chad, Cameroon, Niger, Pakistan and Yemen. These countries comprise populations in which under 15% of the people have bank accounts.
Even the holders of bank accounts in those nations can be left with little to no financial inclusion, as they can be underbanked. This entails that unlike people in the first world, residents in the developing world do not have access to premium banking services. With no access to certain financial instruments, third-world bank account holders are inhibited from taking part in global commerce.
The realm of cryptocurrency has released services like the aforementioned MPesa and BitPesa, which provide banking services and financial instruments to the millions left unbanked via cryptocurrency. MPesa and BitPesa empower users via mobile phone app banking services. Their teaming up with telecommunications has produced a larger market accessibility than traditional banking, leading to the resultant rise in financial inclusion across many countries in Africa and the Middle East.
Financial inclusion also comprises promising growth options for small businesses. Because of the decentralized and global prowess of cryptocurrency, local sellers can start operating imports and exports on a global scale.
This is due to crypto platforms like Nebeus and MPesa. With banks in developing countries like Nigeria reluctant to issue loans to small businesses, even when they provide the necessary collateral, cryptocurrency once again comes to the rescue.
Nebeus, BitPesa, MPesa and other crypto remitting and lending platforms provide crypto-backed loans to small and medium merchants. Without these services and their underpinning cryptocurrency layer, merchants in developing nations would not be able to go into importing and exporting their goods; they would have neither the access to a foreign exchange, nor the means to pay and receive a foreign currency.
Thus, cryptocurrency grants the possibility for local merchants to operate an import and export business, which can boost the economy of the merchants’ developing countries.
Leveraging The Potential Of Crypto
The cryptocurrency industry has come a long way since the Bitcoin inception in 2009. While it was originally a method of payment for those with financial inclusion, it has gained ground in developing nations in the years that followed. For these nations, cryptocurrency has been a means of improving their financial situation, galvanizing the overall improvement of their lives.
Cryptocurrency has helped people in developing countries overcome several problems associated with the third world. However, it should be noted that it is not cryptocurrency alone that has been behind this altruistic phenomenon. In many cases, it has been the platforms and services that have been innovated alongside the digital money, such as the remittance services, exchanges, mining and many others.
Interested to learn more about the latest crypto news? Check out our news site for news and features on cryptocurrency, blockchain and fintech.