Cheap Android phones are starting to take over even in Africa. I tried the Bitcoin Wallet app on a phone being sold in Kenya for about $80, it worked fine.
By the time Bitcoin has become big/interesting enough to make real headway in poorer countries the concept of a non-smart phone won't exist. As Apple is unlikely to ever make a real assault on the low end of the market, I think almost all of these devices will be cheap Chinese-manufactured Androids, which is perfect for us.
Thanks Mike - that's good to know. The more I think about it, the concept of a STK+SMS based system, while possible, is too cumbersome to be readily adopted.
Perhaps the real problem with introducing Bitcoin in Africa (or any other developing economy) is to identify the killer application that will motivate people to give it a try. The only really compelling application I've heard of would be remittances from abroad. I have read that currently those with out bank accounts must rely on Western Union and pay up to a 20% transfer fee.
Brass tacks - how could Bitcoin compete with Western Union as a remittance service? Using Kenya as an example, here is a standard business model:
- Establish a formal money transfer company that conforms to all legal requirements and pays required business fees (one time and ongoing).
- Accept Bitcoins from Kenyan customers via a retail establishment in exchange for Kenyan Shillings.
- Bitcoins that are received are exchanged for USD via international Bitcoin exchanges.
- Proceeds from the exchanges flow back to Kenya via standard interbank transfer and are converted to Kenyan Shillings to fund future payments.
The big question is whether or not that business model would result in reducing the 20% transfer fee that Western Union charges.
A non-standard business model might look something like this:
- Person A, who has a bank account, advertises their willingness to exchange Bitcoin for Kenyan Shillings.
- Person B, who does not have a bank account, receives Bitcoins from a relative abroad.
- Person A meets person B, face to face, and exchanges Kenyan Shillings for Bitcoins via an Android application.
- Person A exchanges Bitcoins that are received for USD via international Bitcoin exchanges.
- Proceeds from the exchanges flow back to Person A's bank account via standard interbank transfer and are converted to Kenyan Shillings to fund future payments.
If trust were established between Person A and person B, then the cash for Bitcoin exchange could also proceed via an exchange of SMS messages and an M-Pesa cash payment. The smaller the amount of value that was exchanged, the less trust that would have to exist to facilitate remote exchanges.
One thing to note, inflation in Kenya (for example) was around 17% last year. That means that holding Kenyan Shillings in a bank account that isn't paying at least 17% APR is a bad idea. Hedging against inflation might explain why Western Union charges such a high fee to exchange dollars for Shillings.
The killer application for Bitcoins in Kenya and other developing economies might ultimately be as a non-inflationary store of value.
