By: Jens Ischebeck
Bitcoin Remittances refer to the physical act of sending money as a payment form.
Normally, the payments are sent out by foreign workers in far-flung countries looking to ensure that their friends and family members back are well provided for.
But there’s a problem, in that using the traditional methods is not only pricey, but it’s also time-consuming.
Legal entities such as banks and other financial institutions often insist on the use of account-based transfers.
It’s a move aimed at curbing money laundering as well as fighting fraud.
Enter Bitcoin remittances!
The development and eventual growth of P2P (peer-to-peer) platforms have brought with it numerous benefits for people looking to send money to Africa.
Such platforms allow foreign-based workers to use cryptocurrencies and Bitcoin to support the people they care about. Today, remittance has become a leading real-life use of BTC.
Even though the process of remitting BTC is similar to the one used in traditional methods, the former is faster and far cheaper.
It gets to do away with the red-tape and bureaucracy that is common with traditional cross border payments.
Inward Remittances | Sending money to an African Country
Given that the African Diaspora community can generate a good income, many foreign based workers are always willing to share the money earned with those they left back home.
The money can be for medical purposes or to pay for a bachelor’s degree. When wiring money from abroad to an African country, the process is termed as inward remittance.
Remittances are traditionally a good source of cash flow (foreign) for many developing countries.
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In 2019, for instance, many countries saw an increase in inward remittances, with some reporting an increase of up to four percent.
That year saw inward remittances to Africa hit the $65-billion mark, with Egypt, Kenya, Ghana, and Nigeria leading the pack.
This particular growth was attributed to a need by immigrants to invest back home, as well as to the notable recovery of economies around the world.
But even as new countries start to adapt to technology that will make it easier to send and receive money, the reality is that it’s still hard to remit money to African countries.
Common methods used to remit money include the use of wire transfers, checks, and online transfers.
The people in Africa can use them to receive money, but they can’t send money to loved ones abroad.
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Outward Remittances | Sending Money Out of an African Country and/or Between African Countries
An outward remittance is commonly described as the process of sending money from a native (African) country to a foreign country.
Recent studies have suggested that it’s more expensive to send money abroad or to another country within the African region than it costs elsewhere in the world.
The implication here is that there are too many hurdles which when combined tend to complicate the process of making outward remittances.
Figures obtained from the World Bank have shown that remittances to countries outside Africa, and within Africa from a native country cost around 10 percent of the payment is made.
Fees alone are a hurdle, as it means that the recipient will end up receiving less money than what was initially intended.
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In other parts of the world, the remittance fee currently stands at 7 percent. This means that it’s cheaper to send money from the US to Ireland than it is to send money from South Africa to Zimbabwe.
Another hurdle comes in the form of excessive regulations put in place by the banking facilities and financial institutions.
For instance, a person sending money from an African country will need to have a bank account from which they can send this money.
While this has been implemented to reduce money laundering, it still ends-up inconveniencing many people.
You have to keep in mind the fact that a large percentage of the African population is unbanked.
The lack of access to traditional banking facilities means that they can’t use them to make either outward remittances or even receive money from their loved ones working abroad.
And this is where the real benefits of using Bitcoin are left by its users. Bitcoin is not only a fast method of making cross border payments, but it also doesn’t have many restrictions.
No bank account is needed for one to send or receive money. Additionally, its users don’t have to worry about satisfying stringent banking regulations.
All they need is access to an e-wallet, and voila! The benefits of using Bitcoin couldn’t be explained in a more simplified manner than this.
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