Garbo Grants Lift Financial Inclusion in Kenya

Bitcoin is seeing increasing adoption in one of Kenya’s poorest regions, thanks to a program that aims to increase the financial inclusion of the region’s residents using the OG cryptocurrency. 

Around 200 residents of the Soweto West neighbourhood of Kibera, in Kenya’s capital, Nairobi, are now using Bitcoin, according to a report from the Associated Press. 

Cryptocurrency grants were introduced to Soweto West just over three years ago by the fintech startup AfriBit as a form of payment for local garbage collection workers — which has gradually spread the use of Bitcoin to other local residents. Additionally, some local merchants and taxis now accept Bitcoin payments. 

While the project has a tiny footprint — the total population of the Kibera region is estimated to be between 250,000 to 1 million people — it gives an insight into crypto’s value to the unbanked and under-banked. AfriBit Africa co-founder Ronnie Mdawida told AP that Bitcoin allows residents of the region to access financial services that they’re unable to access through traditional financial institutions.

In many cases, people in Kibera do not have an opportunity to secure their lives with normal savings.

Ronnie Mdawida, AfriBit Africa

He said Bitcoin allows them to access financial services when banks refuse: “they do not need documentation to have a bank account … that gives them the foundation for financial freedom.”

Reportedly, many residents who’ve received Bitcoin through AfriBit’s program prefer it to cash and to Kenya’s most popular mobile money platform, M-PESA, citing benefits such as increased safety, faster transaction times and reduced fees. 

AfriBit’s platform allows users to make Bitcoin transactions for free, partly by leveraging the cheaper Lightning Network to reduce transaction fees.

Local produce seller, Dotea Anyim, told Associated Press around 10% of customers at her vegetable stand pay in Bitcoin. “I like it because it is cheap and fast and doesn’t have any transaction costs,” she says. “When people pay using Bitcoin, I save that money and use cash to restock vegetables.

Related: Two More US States Eye Bitcoin Reserves, While Kenya Ramps Up Efforts to Legalise Cryptocurrencies

Program Participants Largely HODLers, Which Poses Risk

Despite not requiring a bank account, there remain several substantial barriers to the adoption of digital assets like Bitcoin in very poor regions like Soweto West — users require a phone, electricity, and internet access to make use of the network. Another less obvious barrier preventing the use of Bitcoin as a currency is that most people see it as a speculative asset. 

A number of Kenyans involved in the program said they prefer to hold onto their BTC and see if the price increases, rather than spend it on day-to-day expenses. AP reports that some residents of Soweto West now have 70% to 80% of their net worth in Bitcoin.

According to Ali Hussein Kassim, a fintech entrepreneur and chair of the FinTech Alliance in Kenya, that’s a cause for some concern. 

“In an extremely volatile asset like Bitcoin, it’s overexposure. I can’t afford to lose 80% of my wealth. How about a guy in Kibera?” Kassim said. 

You are exposing a vulnerable community to an ecosystem and to financial services that they can’t necessarily afford to play in.

Ali Hussein Kassim, Chair Fintech Alliance

Related: Ripple Partners with Chipper Cash to Supercharge XRP-Powered Payments Across Africa

Kassim said the potential benefits of crypto, such as cheaper cross-border payments, had little relevance for Soweto West residents and the volatility and unregulated nature of BTC could be downsides.

One participant in AfriBit’s financial inclusion described how he enjoys following Bitcoin’s price actions: “On my phone I put notifications on when bitcoin rises…and it’s all smiles,” adding that “whenever it fluctuates up and down, I know at the end of the day it will just rise.”

No matter where in the world we may live, it seems all crypto degens think alike.