http://cryptocoinchronicle.com/2014/10/guest-post-bitcoin-uganda-disrupting-remittances-developing-world/There is perhaps no greater example of the financial sector's propensity to charge exorbitant fees than in the remittances space—estimated at $440 billion in 2010 according to the World Bank and rising each year—where companies like Western Union and MoneyGram charge anywhere from 6-15 % fees. Many individuals who can ill-afford such losses, predominately immigrants and expats, must pay these charges in order to send money home to family and friends abroad. To these individuals, Bitcoin could provide a means of personal empowerment and financial independence—a peer-to-peer tool that enables those who are most under-served or taken advantage of by the existing financial players to significantly reduce the fees and frictions incurred through domestic or international transfers.
In a recent documentary released by BitcoinFilm.org entitled “Bitcoin in Uganda: Empowering People,” we are introduced to Ronald, a young Ugandan who is currently attending university. Like most university students, Ronald looks to his family for financial support while pursuing his degree. His sister, Ronah, a Ugandan expat living in Massachusetts, and her husband James D’Angelo, a former NASA engineer, prominent Bitcoin evangelist, and founder of the World Bitcoin Network, are happy to lend Ronald some aid—but the thousands of miles and financial barriers that stand between them pose a significant problem.
For sending large sums, traditional money transfer services like MoneyGram and Western Union charge somewhat reasonable fees. But, if you frequently want to send amounts of $100 or less, as James and Ronah would like to do, these services become extremely expensive, making such transactions highly undesirable.
Over a year ago, Ronah and James decided to test out MoneyGram as a way to send Ronald money. James recounts the unpleasant and expensive experience of using these services: “MoneyGram tries to take at least $10 off you. If you do small transactions with Paypal, you are basically doubling your cost. If we could send small amounts of money then we wouldn’t have a need for an alternative. Remittances rely on the fact that you are sending thousands of dollars, but really, most people like to send smaller amounts—what they are doing is charging the crap out of the poor.”
Beyond the issue of costs, there are other barriers to receiving these funds from Ronald’s perspective, like the need for an assortment of IDs. Assuming his local ID would be sufficient to receive his funds from the nearby MoneyGram office, Ronald was dismayed to find out that a passport was actually mandatory to collect the money. Passports are neither necessary nor easy or cheap to come by for most Ugandans. Passports are not at all common, and for good reason—East Africans don’t need a passport to travel between borders in East Africa, and yet such documentation is necessary to pick up $40. Luckily, Ronald has another sister living in Uganda who was able to procure the funds for him after having recently acquired a passport at James’ insistence.
Around a year ago, after many frustrating attempts on both ends to send Ronald money, James and Ronah decided to send bitcoin to Ronald using the Bitcoin wallet Multibit. Multibit is a free and open source application. The wallet is completely decentralized—meaning there is no server network vulnerable to malicious attack or disruption by oppressive governments—and it only requires a small amount of data to be downloaded, so it is perfectly suited for basic laptops with limited hard drive space. According to co-founder Gary Rowe, “Multibit’s motivation is to make it possible for anyone, anywhere to obtain reliable Bitcoin software so that they can have access to an advanced financial system. We are confident that anyone with basic computer skills can access their Bitcoin on a desktop using [this] application.”
James walked Ronald through the process of downloading and using Multibit. The software is extremely simple and intuitive to use, allowing users to either request or send money. In order to send money, one simply puts in the amount that he would like to send, and includes the recipient’s Bitcoin address, which is basically an account number. Within minutes, Ronald set up his digital wallet, provided James with his Bitcoin address, and received a few dollars worth of bitcoin from James. After repeatedly sending money through MoneyGram, which takes up to three business days via the economy option, Ronald was floored—he’d received his money in seconds.
The process had its complications, of course, mainly when it came to exchanging bitcoin for Ugandan Shillings. Bitcoin is indeed still a new technology, so mass adoption has not occurred yet globally, and this process has been even slower in Africa than in the western world. Nevertheless, it only took Ronald a matter of minutes to find someone willing to exchange cash for bitcoin, and ironically, it was an employee at a local money transfer business who agreed to meet Ronald outside the shop in an unofficial capacity. In no time, Ronald whipped out his USB stick and laptop, and just like that, one of Uganda’s earliest person-to-person bitcoin exchanges occurred. “I have exchanged bitcoin for Ugandan Shilling three times at a low rate of 4%, on any amount I wanted to withdraw,” Ronald informed me. “I negotiated this rate with the guy who gave me cash. This was far better than the other times I used to receive money through MoneyGram . . . with Bitcoin, I saved a lot.”
Read the full exclusive and watch the documentary at:
http://cryptocoinchronicle.com/2014/10/guest-post-bitcoin-uganda-disrupting-remittances-developing-world/
