How the Young Somali Hawaladars of Little Mogadishu are Shaping the Future of Bitcoin in Africa (Part 1 of 2)

Youthful Somali hawadalars from East Africa are complementing an age old informal financial practice with an odd piece of a new digital resilient tool – bitcoin.

This article is Part 1 of a 2 Part Series

The importance of informal finance arrangements is a reverberating theme across Africa. Informal doesn’t necessarily mean bad or evil or dirty, it’s just that rather than rely on the heavy hand of the law, some communities prefer to place their trust in reputation and social networks for all trade commerce and financial relationships whether offline or online.

Others, will turn to informal institutions of trade and finance when faced by adversity in an immediate harsh environment such as war, political instability, structural programs or lack of reliable services.

For example, the Igbo traders in Nigeria pulling on social networks to scale resilient informal enterprise in the face of political instability in Nigeria. 

The early airtime currency traders of Africa who gave birth to mobile money like Mpesa tapped into the power of networks to fill a money remittance gap using an odd piece of technology.

Today, the peer to peer Bitcoin traders of Kenya are bypassing an embargo by banks to meet demand for bitcoin by leveraging informal bitcoin trading networks based on trust and reputation.

It is all there.

One of the best case studies is of the Somali people, during post black hawk down cold war of Somali in the 90s by Peter D. Little. 

Set in the early 2000s post war Somalia, his stories tells of the resilience of trade of livestock across the whole of East Africa despite the collapse of central government and no functional system. 

The Ethiopia Somali Kenya cattle trade flourished in spite of the failed state conditions, on the back of trust network built on kinship. Through informal financial instruments and contracts of exchange and trade, they were able to sustain demand in Nairobi, forming a key trading corridor network in the Horn of Africa

In the post digital, post mobile world of 2019, the Somali people of little Mogadishu are under a different kind of threat on their digital financial lives.

Digital financial surveillance is underway in Kenya as part of tax reforms by revenue authorities including mandatory monitoring of electronic transactions and taxes on the digital economy.

Kenya is under pressure to reform after taking on too much debt to fund infrastructure projects that haven’t quit materialized as planned. An economic slow down, high youth unemployment rates and the weight of repayments on sovereign debts are some of the symptoms of the times. Some commentators have likened the impending state of the times to the Structural Adjustment Programs of the late 80s to 90s which shaped much of what is today’s informal economy.

As we shall see, the Somali people are some of the most sensitive to threats of erosion capital. It is in their blood, a natural instinct to respond to invasive threats to wealth such as hawala networks to bypass strict capital controls.

This got me thinking, how will the Somali people weather a period of heavy monitoring, high scrutiny and low trust?

The the answer lies in Eastleigh, a bustling business district in one of East Africa’s capitals, Nairobi. Here, youthful Somali hawadalars are complementing the old informal financial practices with an odd piece of a new digital resilient tool – bitcoin.

While there is no war today, times are similarly tough, the only difference is that is all mostly digital.

This is Part 1 of a 2 Part Series on how the young Somali Hawaladars of little Mogadishu are shaping the future of bitcoin in Africa

Continue reading “How the Young Somali Hawaladars of Little Mogadishu are Shaping the Future of Bitcoin in Africa (Part 1 of 2)”

Why Africans are not Just Passive Recipients of Technology

Should technology solutions aimed at the developing world, seek to build on and enhance indigenous, activities — economic or otherwise — or, where necessary, is it okay just to replace and lose them?

By Ken Banks

In Ghana, it’s popularly known as Susu. In Cameroon, Tontines or Chilembe. And in South Africa, stokfel. Today, you’d most likely call it plain-old microfinance, the nearest term we have for it.

Age-old indigenous credit schemes have run perfectly well without much outside intervention for generations. Although, in our excitement to implement new technologies and solutions, we sometimes fail to recognize them.

Innovations such as mobile banking – great as they may be – are hailed as revolutionary without much consideration for what may have come before, or who the original innovators may have been.

Continue reading “Why Africans are not Just Passive Recipients of Technology”

Blockchain, Identity, Chamas and Africa: A Q & A with Ian Grigg

Way before bitcoin and the blockchain, Ian Grigg was part of a vibrant group of pioneers that pursued the vision of digital cash and financial cryptography in the 90s – what is now call blockchain. It is an understatement to say he has seen it all.

By God! There is too much noise in the blockchain industry. I know because I live it everyday; have been living it for the past 5 years.

Over time, I have devised a method to navigate and filter out the practical and realistic from the bold, utopian-dream proclamations. The trick is to seek out and follow the more sober-headed minds in the industry; these are the older wiser tech heads and the level-headed critics in the industry.

Ian grigg is one of them.

Ian Grigg is an architect and financial cryptographer who has been building, auditing and consulting for cryptographic ledger platforms for over 20 years. Way before bitcoin and the blockchain, he was part of a vibrant group of pioneers that pursued the vision of digital cash and financial cryptography in the 90s – what is now call blockchain. It is an understatement to say he has seen it all.

He is mostly known for 3 accomplishments (amongst others)

Co-inventor of the Triple Entry Accounting Ledger, a concept that sparked the explosion of a $400 billion Bitcoin, cryptocurrency and blockchain industry – bitcoin is the world’s first triple ledger entry system at scale.

The inventor of the Ricardian contract, a canonical design pattern for tying legal contracts into digital assets issued over the internet. His work on Ricardian Contracts foreshadowed today’s blockchain smart contracts.

Confirming the identity of 2 of the members of the team Satoshi Nakamoto that birthed Bitcoin – Craig Wright and Dave Kleiman

More recently, Ian was an architect consultant for one of the world’s largest consortium based distributed ledger protocol, R3 Corda, formed by 43 of the world’s largest banks, a partner at the $4 billion EOS blockchain for business and commercial scale and an audit consultant for Senegal’s Digital Currency roll out masterplan for Francophone Africa, serving under eCurrencyMint on behalf of Omidyar Network.

Today, Ian is a cofounder and Chief Technology officer at Chamapesa, a project using blockchain elements to digitize the indigenous culture of social savings and investments that is prevalent across Africa and the developing world. Ian believes the Chama groups of Kenya and savings groups communities in Africa and Latin America hold the key to designing identity systems for a blockchain powered internet economy.

So when Ian speaks, you listen and pay attention.

I managed to lock him down for a question and answer session, probing his mind on Blockchain, Identity, Chamas and Africa.

Whatever your opinions, what follows is one of the best bits of wisdom  you will come across on the interwebs.

Enjoy!

Continue reading “Blockchain, Identity, Chamas and Africa: A Q & A with Ian Grigg”

Why African Fintech Wants To Digitize Chamas, But Can’t Seem To Get It Right

Why is the digitization of Chama groups so valuable for Fintechs and Telcos and Banks? And more interestingly, why is it such a tough nut to crack?

 

A group of high profile organizations including Facebook, Mastercard, FSD Kenya, Safaricom, Fintech startups,  and even the World Bank have convened in Nairobi for a one day workshop to try figure out how to digitize the chama groups of East Africa. While it has been over a decade of digital financial inclusion estimated at 80%, none of them have figured out how to successfully digitize chama groups.

Just so we’re on the same page, I use chamas as a catchall for any group of people who come together with a shared goal, agree on a self governing mechanism and pool together resources such as time, labour or capital to achieve their shared aspirations. This simple form of self organization, self governance and chama identity makes it a highly flexible people-structure and why it exists in different forms across the world and Africa as Paare in Chad, Asusu in Nigeria or Chilemba in Zambia.

So why is the digitization of Chama groups so valuable for Fintechs and Telcos and Banks? And more interestingly, why is it such a tough nut to crack?

I found the answers to these questions from Toffene Karma, the one person who successfully digitized the social savings group of Chad West Africa known as Paare using a mobile product known as TigoPaare.

Continue reading “Why African Fintech Wants To Digitize Chamas, But Can’t Seem To Get It Right”

Chamas are the Financial Side of Real World Social Networks

Chamas and social savings groups are the last barrier that protects people when all else is failing like banks, or government or social welfare.

Boda Boda Savings Group Meeting at Ruiru
Boda boda chama by Michael Kimani @pesa_africa

A picture worth 1000 words!

This picture was taken at Ruiru, a town about 20km beyond Nairobi city. What you see here is a group of motorcycles popularly known as boda bodas parked next to Wakini fueling station right outside Mama Lucy’s Deli on your way to Wa Matangi. The feel of this place is a blend between a pure rural and pure urban area – peri urban. Don’t be fooled by the dirt. So why are there 11 empty boda boda? Let me tell you why. Continue reading “Chamas are the Financial Side of Real World Social Networks”

Is Financial Inclusion in Africa Overrated?

People in Africa do not sleep and dream of having bank accounts. What they want is income to put in a bank account. Simply having a bank account gets you nowhere. Simply being cashless gets you nowhere.

Prepaid economy
Logo designed for The Prepaid Economy by Jennifer Mwaogwugwu 3/16/13

 This week I was honored be part of #WhatsNextFinclusion, a series put together by Metta on the state of the Fintech industry in Kenya and more importantly, the future. I was there on behalf of ChamaPesa – a ledger keeping app for social savings groups in Africa. Check out #ChamaPesa on twitter.

This year’s edition was sponsored by Mastercard and the moderator threw some pertinent questions at the panel. I, of course, have my own opinions from my own experience over the past 4 years – what i have observed as an analyst, user researcher, blogger and now co-founder of a startup in the space.

But, I thought it better to pose the same questions to some of the more experienced, brilliant minds from the continent that I have had the privilege to interact with, learn from and exchange ideas.  

What follows is a response from Mwalimu Nyerere – my friend and mentor – on the state of the financial inclusion industry in Kenya and Africa in the raw.  Nothing has been alter-rated so as to preserve the original thought and tone, only polished to give it flow.

Continue reading “Is Financial Inclusion in Africa Overrated?”

How Kenya’s Digital Financial Inclusion Industry Is Failing Women Entrepreneurs

Mshwari & Mpesa is only half the story. The rest of it is happening offline, in cash and trust networks

Don’t get me wrong, the efforts by the Kenyan financial inclusion industry have not gone unnoticed. Without naming specifics, the industry’s greatest feat by far is building a wide accessible network for formal financial services.

But access is only one item on a long list. It doesn’t matter how many bank accounts you give to the poor. Heck, even throw in a bitcoin cryptocurrency bank account – 2 mobile banks, 5 traditional bank accounts and 2 cryptocurrency bank accounts. Access means nothing when you can’t put money in people’s pockets. I speak for all when I say Kenyan people want to be empowered, they want more pesa in their pockets period. And that’s ok!

So when I criticize the industry, I mean well.

If you’ve been up and about in Kenya, you will appreciate how pesa will almost always positively correlate to some sort of biashara opportunity and even more likely one in the informal sector

My assertion is there is an overall failure by Kenya’s financial inclusion industry to look beyond the digital personas of the people of East Africa’s informal economy. Whereas, much of their lives unravel offline in cash, trust and biashara networks.

Continue reading “How Kenya’s Digital Financial Inclusion Industry Is Failing Women Entrepreneurs”