Cryptocurrencies and Social Impact in Africa

By Joshua Ogwu

In a world driven by traditional payment systems, cryptocurrencies emerge as a disruptive force, revolutionizing  financial transactions in Africa. Beyond their ability to challenge the status quo, these digital currencies offer a tantalising promise of cheaper, faster, and more transparent transactions. However, their potential reaches far beyond economic efficiency. Cryptocurrencies hold immense power to ignite social and humanitarian change across the African continent.

Through the remarkable technology of blockchain, these digital assets provide innovative solutions to long-standing humanitarian challenges. By bypassing intermediaries and dismantling bureaucratic hurdles, cryptocurrencies expedite the delivery of funds, empowering individuals and organisations to combat fraud and corruption while making a profound difference in the lives of those in need.

Crypto donation platforms have revolutionised humanitarian funding by covering a wide range of cause-based funds, including education, disaster relief, food security, environmental conservation, and support for protest movements.

Donations and loans through cryptocurrencies continue to soar high particularly in Africa. Interestingly, Africa remains the only continent where foreign aid outstrips private capital inflow by a large margin with remittance alone valued at over $45 billion in 2021. Sub-Saharan Africa also remains the most expensive region to send money to, as sending $200 will cost an average of 9 percent in remittance. Cryptocurrencies' low transaction fees have attracted aid donors and could contribute to significant remittance volumes especially among African migrants.

Cryptocurrency philanthropy is revolutionising traditional giving by empowering smaller nonprofits to access funds from anonymous crypto donors. This trend is especially impactful in cases where government restrictions or hoarding have limited funding opportunities.

The impact of crypto philanthropy is evident in the ongoing Ukraine-Russia war, where the country has received more than $100 million in crypto donations to bolster its efforts and provide aid to the war-ravaged population. This significant influx of funds showcases the transformative power of crypto in changing the landscape of humanitarian financing and supporting nations in times of crisis. 

In recent years, crypto philanthropy in Africa has witnessed exponential growth, permeating various critical economic sectors and serving as a catalyst for profound social development programs across the continent. This emerging trend has become a powerful medium of change, enabling significant impacts on initiatives aimed at driving positive social change and sustainable development throughout Africa.

In the educational sector, cryptocurrencies have been used to facilitate funding of fees and projects. Cryptocurrencies are also increasingly used to support educational crowdfunding initiatives, helping young Africans interested in schooling, supporting scholarship grants, and funding community projects aimed at improving education. There are many laudable initiatives by Charity organisations in Africa that have supported education through crypto donations.

For instance  Binance Charity, recognising the need of African students to have access to food while studying, launched the Lunch for children project  in Uganda which is estimated to have provided meals to over 6000 students and teachers. Interestingly, the program is backed by cryptocurrency, as crypto wallets are opened for children and funds in BNB, BTC, and ETH to suppliers’ wallets to exchange for their children’s food. 

Built with Bitcoin Foundation, a humanitarian organisation powered by Bitcoin, announced that it has constructed two new schools in Motherwell Township, near Port Elizabeth, South Africa from an anonymous donation of 1 BTC. The organisation has built eight schools in the continent, all sponsored by Bitcoin donations. 

Donations in cryptocurrencies have also been used to fund many social care projects ranging from healthcare, access to affordable water, disaster relief efforts, access to food and even preservation of wildlife. Many NGOs across Africa now accept Bitcoin donations as aids for relief funds and social projects and crypto investors are willingly responding to this development. In 2020, Twitter Boss Jack Dorsey capitalised on NFT hype by tokenizing the first ever tweet to the NFT marketplace, generating over $2.5 million, used as charity to families in Kenya, Rwanda, Liberia and Malawi.

Through Decentralised Finance, cryptocurrency is gradually fulfilling its prophetic mandate of fostering financial inclusion by granting small businesses and start-ups access to affordable interest loans. Crypto loans allow borrowers to use their crypto assets as collateral or obtain loans without collateral, providing access to financing based on their cryptocurrency holdings. In this manner, the borrower obtains fiat loans from lenders in place of his crypto assets, which serve as securities in the event that the loan is not repaid. This will greatly impact small businesses, which constitutes an integral part of African economies.

In the Agricultural sector, cryptocurrencies are now used in the commodity financing space to provide affordable loans to smallholder farmers in African rural communities. Crypto loans are now being offered to give farmers better access to finance for growing crops. Some notable Fintech firms are looking to leverage on Africa’s crypto potentials and have already begun building structures that will offer DeFi loans. At the beginning of the year, Cardano announced its plan to start offering Defi loans in Africa. Local start-ups like Kampay and Koinwa have already started offering loans to small holder farmers, small businesses and individuals.

Cryptocurrency is not only impacting finance in Africa but promoting justice. For many young Africans, cryptocurrencies have become a tool to demonstrate their support for human rights causes and movements within the continent. During the EndSars protest in Nigeria, which was fuelled by police brutality of youths, bitcoin was used as an alternative means of funding by organisations receiving donations for the protest.  

Though it has been argued that cryptocurrencies could also be used to support unworthy causes like terrorist activities and rebel movements, the proposition remains a two sided coin and the evil in crypto can be hacked to safety by regulation. 

Cryptocurrency is also giving leeway to innovations across the continent, allowing investors to set up projects that will benefit Africans and have an overall positive effect on the real economy of African states. These innovations have the potential to affect inefficient industries, provide job opportunities and increase financial inclusion. For instance, Save the Children, an NGO in Rwanda benefiting largely from crypto funding through Cardano's cryptocurrency (ADA), launched Microworks in 2021, which has engaged unemployed refugee youth to earn a living through collecting data with their mobile phones for payment.  

In South Africa, renewable energy start up, Sunexchange has provided a system where interested persons across the globe can directly invest in solar Infrastructure using cryptocurrencies, thus providing a gateway for significant improvements in Africa's power sector.

Summarily, cryptocurrency is sponsoring a wind of change in the continent, particularly among young Africans, causing innovation to blossom, and allowing for social benefits to reach all and sundry. Africans are now even turning to crypto to power their grassroots communities, community projects and embracing the togetherness and communal spirit the continent has always been associated with.