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)”

How Nokia and Prepaid Airtime Fractionalization Gave Rise to Africa’s Digital Economy: Guest Post by Niti Bhan

What can we learn about the digital society emerging in Africa without the trappings of legacy infrastructure and institutions?

3 seemingly unrelated events in different parts of the world in the early to mid 90s converged, to culminate in the perfect storm  – what we now call Africa’s Rising digital economy.

One was in the mid 1990s, in a small city in northern Finland, where engineers and designers began work on the product development of a mobile phone that would eventually become one of the best selling Nokia models ever – the 3310, released in Europe and the Far East in the year 2000. The continent of Africa was not yet on their radar as a target market and Nokia’s impact on sub Saharan Africa, as well as its iconic success for its legendary durability was still some years in the future.

The second event was around the same time, in 1994 – 1995. Portugal Telecom’s mobile telephony division TMN, invented the prepaid business model whilst researching ways to lower barriers to credit services, and thus reach a wider audience. They too, were not thinking about the farmers, traders, or biashara vendors on the African continent, for whom the prepaid plan would turn out to be a godsend, matching their needs for flexibility and control over the timing and amounts spent on cellular services. This, too, was still a handful of years in the future.

The third is the liberalization of African state owned monopolies such as in telecommunications in the mid 1990s which opened the doors to private sector operators in cellular telephony, and thus, to competition.

These 3 events would prove to be a fertile time for the perfect storm and the firm foundation on which today’s African digital economy thrives.

Continue reading “How Nokia and Prepaid Airtime Fractionalization Gave Rise to Africa’s Digital Economy: Guest Post by Niti Bhan”

Why the Legacy of Uber’s App and Business Model in Africa will outlive the company

The legacy that Uber will leave behind in Africa’s mobile first decentralized digital economic ecosystem is the ability of a simple algorithm to collate disparate sources of demand for goods or services, and then redistribute them in the most efficient and productive manner among suppliers.

By Niti Bhan, 

As news of Uber’s possible decline and fall filters in, it behooves me to take a moment to ponder the implications for sub Saharan Africa’s digital economic ecosystem, particularly, the decentralized hybrid one emerging among the erstwhile informal sectors of the economy, such as motorcycle taxis like Safeboda and other on demand services.

While Uber itself has made waves in all the major urban metros across the African continent – Lagos, Nairobi, Johannesburg, etc – its inevitable end will leave a greater legacy than simply copycat taxi hailing services.

Continue reading “Why the Legacy of Uber’s App and Business Model in Africa will outlive the company”