Africa is a diversified continent with over a billion people living in its streets. There are several ethnicities, cultures and ways of life in Africa. The diversity of the African people is a major attribute of the continent and considered as its major strength. This diversity ensures that the streets of Africa do not look exactly the same everywhere you go, but one thing that is common in every street is the movement of money, either through formal or informal channels. In this article, we will take a closer look at the streets of Africa and how money is being moved.
The streets of Africa differ depending on where you’re looking. A major differentiating factor is the population, which determines the level of economical and social activities occurring within the streets. Some streets are filled with activities, people buying and selling goods and services, while some are quiet, characterized only by their residential activities.
Over the years Africans have been known for adopting informal economies to meet their needs as majority of its citizens lack access to traditional banking. Informal systems of money movement and services are used to substitute for formal services, such as the popular Osusu which provides its participants access to funding in the agreement that each participant will raise money for each other participants till the circle is complete.
Some of these informal financial means are so deep-rooted in the streets of Africa, that some startups instead of disrupting them are digitizing the existing solutions by providing speed, security and strengthening trust.
It is not strange to hear of the term ‘collector’ or its equivalent in some streets of Africa. This is an informal means of saving where a trusted personnel helps traders, and business people save their money over a period of time before gaining access to their savings. These collectors charge a small fee for their role in helping you save for a big project, event, or business venture. Today startups like PiggyVest act as a modern day collector helping people save their money and curb their spending habits.
Outside these informal financial solutions that have found success in Africa, risks not withstanding, the movement of money has followed similar informal systems.
The Hawala system of moving money in Africa is an informal trust based system that allows the transfer of money from one place to another without an actual movement of money, but with trusted intermediaries using their own money to settle these transactions. This system has been employed both for local transactions and remittance. It provides cheaper, and faster means of moving money without need for identification or any formal documentation. A simple Hawala transaction involves for example, a sender who wants to deliver cash to a recipient in another street, and goes to an Hawala dealer, who contacts his fellow Hawala in the street of the recipient and tells him to deliver the cash to the recipient after verifying him with say a pass phrase, no movement of money is involved, cash is given to the recipient based on trust with the two Hawalas who will settle themselves.
Today fintech solutions like M-pesa and Paga are using the Hawala system to provide financial services to those who lack access to traditional banking.
Over the past couple of years mobile money has provided disruptive ways to provide financial services to the undeserved population in Africa. According to a report by GSMA mobile money transactions hit $1 trillion globally in 2021, with Africa accounting for almost 70% of that volume. Africa also boasts a staggering 605 million registered accounts of the total global of 1.35 billion, an indication that Africans are now embracing digitized forms of money movement and financial services.
While mobile money is growing rapidly, Africans have also shown interest in crypto, as adoption in Africa is amongst the fastest growing compared to other regions in the world. While Africans are not yet known for their adoption of crypto for payments, the trends driving crypto adoption in Africa includes, cross-border payment & remittance, grass-root adoption, and wealth preservation.
In 2021, about $19 billion was remitted to Nigeria alone via crypto. In comparison with the $16 billion for global remittance via mobile money, this shows that Africans favour crypto when it comes to moving money across borders.
The traditional banking system is also finding success as it increases its reach across the streets of Africa. Some banks have developed their own mobile money apps to bridge the gap and serve the excluded. With many Central banks introducing or planing to introduce Central Bank Digital Currency (CBDC) and government backed digital payment solutions such as the Nigeria e-Naira, African governments are pushing for a more cashless economy there by taking cash away from the streets of Africa, which till date is still the most prevailing way to move money in the streets of Africa.
In conclusion, the growth of mobile and smartphone penetration, and the internet shows that there is high potential for development and adoption of formal financial systems to tackle inadequacy in Africa’s economies and provide Africans with a better, faster and more reliable means to move money.