Tech-savvy Africans are hedging against inflation by going digital

 

 

By Conrad Onyango, bird story agency

 

The recent announcement by Opera MiniPay that it had signed up over one million users in Kenya, Nigeria, and Ghana just five months after its launch is the clearest indication yet of the rising popularity of decentralised finance, or DeFi tools, across the continent.

“MiniPay makes it easier and more affordable for individuals across Africa to acquire, send and receive Mento cUSD stablecoins – simply by using mobile phone numbers,” said MiniPay’s product director, Charles Hamel.

MiniPay is a self-custodial wallet for dollar stablecoins that offers cUSD, a stablecoin built on the Celo blockchain, and touted as “decentralised”, so that its value is linked to a variety of currencies, which makes it more stable.

Hamel explained recently at the Africa Tech Summit 2024 that the payment platform was integrated into the Opera Mini browser to provide African users with a more stable way to store and send money using digital assets.

The move to decentralised finance in Africa is being driven by the double-whammy of high inflation rates and battered currencies.

According to MiniPay, the cUSD offers multiple advantages, including mitigating currency volatility and providing a reliable store of value.

“This is especially crucial in regions affected by hyperinflation and economic uncertainty, where stablecoins present a decentralised and accessible alternative to traditional financial services,” the payment platform said in a statement.

Severe currency volatility across Africa has disrupted some of the continent’s strongest currencies including the Nigerian Naira and Kenya Shilling – both now considered among the world’s most undervalued currencies.

According to Bloomberg data, the two currencies featured in a list of 10 that experienced the most devaluation in 2023, globally.

The Naira was ranked the third most devalued currency in the world after losing 55% of its value against the dollar, while the Kenya shilling lost over 20% against the greenback in 2023.

The Angolan Kwanza (-39%), Malawian Kwacha (-39%), Zambian Kwacha (-29%), Burundi franc (-27%), Congolese franc (-24%) also featured among the world’s 10 worst-performing currencies.

Several other DeFi-backed startups in Nigeria and Kenya are getting noticed by investors..

Canza Finance, a Nigerian Web3 Neobank that helps African startups with cross-border payments raised US$2.3 million in January 2024 to expand Baki – its African DeFi platform.

“With the help of Baki and stablecoins, Canza Finance aims to assist businesses in achieving dollar stability and overcoming traditional forex challenges. This will ultimately result in reducing transaction costs to just 1%, making it easier and more affordable for businesses to conduct cross-border transactions in Africa,” said Canza Finance in a statement.

Canza has ambitions of Baki building the world’s largest non-institutional financial system.

“Baki provides the ability to offer infinite liquidity at the official conversion rate, and natively quote assets in local currencies on chain,” Baki’s website states.

Another DeFi startup, Jia, in May 2023 secured US$4.3 million in seed funding.

Jia, which is also looking at expanding the company’s operations in West Africa and Kenya, specialises in offering loans of up to US$5,000 to small businesses to fill the gap left by other digital lenders and loan apps that usually do not offer credit exceeding US$1,000.

A group of affiliated DeFi organisations, the Africa DeFi Alliance, aims to deploy US$100 billion in working capital to help close the African MSME Funding Gap. Their goal is to provide MSMEs with capital that is ten times cheaper than today’s commercial rates.

“We believe that by uniting the many stakeholders in Africa and beyond who can unlock working capital to African MSMEs, we will actualise a future where an open infrastructure drives growth for vendors and more businesses at scale,” the alliance says on X.

According to the World Bank, SMEs which account for 60% of jobs in Africa face a huge finance gap of US$330 billion.

bird story agency