KYBERA, Kenya (AP) – Lining the streets of the slums in what is considered Africa’s largest city, a typical vegetable stand stands out with its acceptance of Bitcoin as a payment option.
In the Soweto West neighborhood of Kibera, about 200 residents utilize Bitcoin, part of an initiative aimed at bringing financial services to one of the country’s poorest and least banked areas.
The promoter asserts that Bitcoin’s adoption aligns with its vision as an accessible, democratic technology, though experts caution about the associated risks.
Bitcoin’s introduction to Soweto West comes from the Kenyan fintech company Afribit Africa, through a non-profit initiative designed to enhance financial inclusion.
“Many in Kibera lack opportunities to save meaningfully,” said Ronnie Mudauda, co-founder of Afribit Africa. “With Bitcoin, they don’t need documents for a bank account… it establishes a foundation for financial freedom.”
Launched in 2009 following the global financial crisis, Bitcoin, the first and largest cryptocurrency, was designed as a decentralized digital asset to serve as an alternative payment method.
This asset is increasingly viewed as a valuable store, akin to digital gold. Bitcoin has garnered a passionate following, as its price surged nearly 1,000% in the past five years. However, its volatility and lack of regulation raise concerns.
Afribit Africa introduced Bitcoin to Soweto West in early 2022 via a cryptographic grant for local garbage collectors. This initiative consists of numerous youths, showcasing their openness to new technologies.
After their Sunday garbage collection, workers are compensated in Bitcoin, receiving a few dollars’ worth. Afribit Africa estimates that these collectors have infused approximately $10,000 into the local economy, where many residents earn around $1 daily.
Currently, a small number of other locals own Bitcoin, with some merchants and motorcycle taxi drivers accepting cryptocurrency payments.
Damiano Magak, a 23-year-old garbage collector and food vendor, stated he prefers Bitcoin over M-Pesa, Kenya’s prevalent mobile money platform.
While M-Pesa transactions between individuals or businesses are free up to 100 Kenyan Shillings (about 78 cents), costs rise with larger amounts. In contrast, transactions made through Afribit Africa’s platform on the Lightning Bitcoin network incur no fees.
Another garbage collector, Onesmus Many, 30, mentioned he feels safer storing his wealth in Bitcoin rather than cash due to the high crime rates.
Merchant Dotea Anyim noted that about 10% of her vegetable stand customers pay with Bitcoin.
“I appreciate it because it’s inexpensive, fast, and incurs no transaction fees,” she remarked. “When customers pay in Bitcoin, I save that money and use cash to replenish my vegetable stock.”
Many residents are also attracted by the prospect of rising cryptocurrency prices. Both Magak and others expressed they hold around 70% to 80% of their wealth in Bitcoin.
“It’s my value, and I risk it with Bitcoin,” Magak stated.
This raises concerns for Ali Hussein Kassim, a fintech entrepreneur and the chairman of the Kenya Fintech Alliance.
“Investing in such a volatile asset like Bitcoin is risky. I can’t afford to lose 80% of my wealth. What about the residents of Kibera?” Kassim questioned. “Such exposure could prove detrimental in an already vulnerable community with financial services they cannot necessarily exploit.”
While Kassim acknowledged the potential advantages of digital assets, particularly in facilitating cheaper cross-border payments like remittances, he did not foresee any benefits for Kibera.
The volatility of Bitcoin could overshadow the advantages of reduced transaction fees, as it lacks the protections associated with conventional financial services due to inadequate regulation.
Mudauda countered, arguing that the unregulated nature of Bitcoin could also be advantageous.
“We are not shying away from the associated risks,” he emphasized, focusing on the group’s educational efforts in Kibera regarding Bitcoin, which includes community financial literacy training and cryptocurrency courses.
Challenges persist in introducing Bitcoin to developing nations. Despite El Salvador’s adoption of Bitcoin as a legal tender, the Central African Republic has since reversed its decision.
In Kenya, the digital assets sector encounters legal and regulatory obstacles, including crackdowns on cryptocurrency giveaways, though this small project in Soweto West operates within permitted boundaries.
“On my phone, I received notifications whenever Bitcoin prices increased… it’s all smiles,” Magak said. “Despite fluctuations, I remain optimistic about its long-term value.”
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