Why Africa’s Policy Makers Should be Worried About Virtual Platforms and Virtual Currencies

In a lot of ways, Facebook is more like a government than a traditional company. What does this mean for Africa’s Governments, fintech industry and policy makers?

“In a lot of ways, Facebook is more like a government than a traditional company” – Mark Zuckerburg

The rise of virtual internet platforms such as Facebook, Whatsapp, Telegram, Kakao is challenging established regimes of state and sovereignty, monetary policy and issuance of currency, control, ownership and governance of virtual resources in developing countries in Africa.

Billions of users, including Africans are spending more time on virtual networked platforms that command the attention of far greater audiences than the populations of individual nation states. WhatsApp has 1 billion, Telegram 200 million users and Facebook has 2.3 billion users worldwide.

Now, these virtual platforms are all getting into the business of  issuing currencies using ‘blockchains’ or shared ledgers to monetize all the possibilities of economic activity within the confines of their platforms. 

Out of all of them, Facebook’s Libra coin drew the most attention. No surprise at all considering the sheer size of its 2.3 billion people user base.

What does this mean for Africa’s fintech industry and policies, that tech giants from overseas can monetize the digital economy of Africa through non-sovereign means including issuance of digital currencies?

What follows is a transcript of conversations between Michael Kimani  and Andile Masuku, about the current shift to internet virtual platforms, and currencies, and what lies ahead for Africa’s Fintech policy.

Michael Kimani is Head of Business Development East Africa at Zippie, a mobile blockchain platform, a Fintech Innovation Advisor for Visa and Secretary General of the Blockchain Association of Kenya. He is one of East Africa’s renowned digital money analysts.

Andile Masaku is a Co-founder and Executive Producer at Africa Tech RoundUp.

Some parts of this Q&A were pulled from a podcast with Andile, while some of it are from phone discussions with Malak Gharib of NPR and Ronit Ghose of Citi Bank.

The structure is presented in the format of a Question and Answer. Enjoy!

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5 Reasons Why Facebook’s New Cryptocurrency ‘Libra’ is Bad News for Africa

For many emerging ‘mobile first’ consumers from East Africa the internet is indistinguishable from Facebook and the internet does not exist outside of this singular social network.

Facebook is plotting a new cryptocurrency dubbed ‘Libra’ for its vast social network scheduled for release in 2020. Libra coin, a virtual currency, will be governed by Libra association, a conglomerate of 28 American and European corporations who will decide everything from who can join the network, process transactions and how much currency will circulate.

As an African, it is my opinion that the peoples of Africa, its governments and central banks should be concerned, because we risk ceding more control, from the little we have now, to a digital colonial version of the internet.

That is because, for many emerging ‘mobile first’ consumers from East Africa the internet is indistinguishable from Facebook and the internet does not exist outside of this singular social network.

In a future post, I will write on how Africa can redress this imbalance. 

But today, I have 5 Reasons Why Facebook’s New Cryptocurrency ‘Libra’ is Bad News for Africa.

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How Africa’s Airtime Currency Traders Birthed A Fintech Innovation Playbook

This is a story of how informal airtime currency resellers of Africa birthed mPesa, mobile money, and an innovation playbook for Africa’s emerging economy.

Not everyone can see it.

If you are keen though, you’ll realize Africa’s informal economy is an open playbook on how to innovate, build and scale successful products and services for the emerging African consumers. Ask me how I know, and I’ll point you to the little known story of prepaid airtime currency re-sellers in Africa who, by cobbling up a rudimentary hack, were able to model a country-wide money transfer network, that would later be adopted by Africa’s telecommunication companies (Telco), spun off into a massive revenue generating business to eventually dethrone the monopoly of banks in East Africa.

But the real story is neither about airtime, nor Telcos. What it is really about are the lessons we can draw upon Africa’s informal economy on how to approach innovation in Africa.

This is a story of how the prepaid airtime re-sellers of Africa not only birthed mPesa, and mobile money, but an innovation playbook for Africa’s emerging economy.

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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.

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How The Chinese, Africa’s Most Popular Browser , And A Bitcoin Mining Company Are About To Change African Payments

Africa’s most popular mobile browser, Opera is about to radically change the payments landscape in Africa.

China Loves Africa 2 by Michael Soi
Michael Soi’s China Loves Africa Collection

I think before this blog and thread, the global cryptocurrency community will not appreciate the strategic relevance of Bitmain’s $50 million investment round into one of Africa’s most popular Chinese owned mobile browser, Opera. What they will not see is the Fintech connection at play in East Africa, where the wildly successful mobile browser is creeping into digital financial services like mobile payments. For the payment professionals of East Africa, the pertinence of this investment on the future of their industry will not dawn on them perhaps until it is too late.

Last week’s SEC’s disclosure on Opera’s newest investor for their $115 million IPO, was the best strategic news on cryptocurrency ‘adoption’ in Africa I have seen in the last 5 years with far reaching implications on e-commerce, trade and payments for the region than appears at first glance.

My choice of a header image above accurately captures increasing Chinese influence on Kenya and Africa, at both state and commercial level.

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How the Central Bank Of Kenya Plans To Regulate Bitcoin and Cryptocurrencies

Rather than fight change, the Central Bank of Kenya now seems to be reconsidering its stance on cryptocurrencies as a radically new way of high-speed, low-cost value transfer independent of traditional financial intermediaries.

Bitcoin and cryptocurrencies are a puzzle especially for regulators. Over the last 4 years our dear Central Bank Governor, Dr. Patrick Njoroge has consistently been opposed to the idea of cryptocurrencies. He issued 2 damning public notices warning the public to stay away and another circular expressly requesting banks to choke any value transfer activity related to cryptocurrencies.

As per the Central Bank of Kenya Act, he is well within his right. A bank is a regulated private business. You cannot compel a bank to take you as a customer or take your business. Thus, every once in a while, the governor pulls out his trump card to remind us who is boss.

But mounting pressure has pinned the old man against the wall, forcing him to revisit his dogmatism. An article from the Standard dated May 23rd titled “CBK Warms Up to Cryptocurrencies”  read

“CBK Governor Patrick Njoroge said the regulator was open to introducing cryptocurrencies such as bitcoin as alternative payment vehicles with the opportunity to reduce fraud.”

While in the past, all the the financial instruments that intermediary companies use for fund transfers were based on fiat currencies, in the forms of cash, bank deposits and electronic money – it is no longer the case with the advent of Bitcoin.

Rather than fight change, the Central Bank of Kenya now seems to be reconsidering its stance on cryptocurrencies as a radically new way of high-speed, low-cost value transfer independent of traditional financial intermediaries.

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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”